Social responsibility in non-investor-owned organisations

• DOI: https://doi.org/10.1108/CG-04-2019-0123
• Pages: 343-363
• Date: 04 February 2020
• Published date: 04 February 2020
• Author: Silvia Sacchetti,Ermanno Tortia
• Subject Matter: Corporate governance,Strategy

Social responsibility in

non-investor-owned organisations

Silvia Sacchetti and Ermanno Tortia

Abstract

Purpose –This study investigates how the creation of social value occurs in different organisational

fields, and how it is implementedby organisations that are typically associated with memberwelfare and

social objectives. The purpose of this study, specifically, is to analyse how social responsibility is

implemented in organisational forms that do not pursue profit-making objectives in an exclusive or

dominant way, that is, organisations that explicitly shape their aims and governance around the

productionof social value.

Design/methodology/approach –The paper discusses the main types of organisational forms and their

relation with social responsibility. It then presents four case studies completed between 2011 and2013 in

Scotland, UK. These include a range of types of non-investor-owned organisations: two employee-owned

companies, one co-operative enterprise and one social enterprise. The case studies have explanatory and

descriptive nature, and were aimed at enquiring how non-conventional organisations design their

governance, achieve economic sustainability andshow capacity to produce social value.

Findings –Findingshighlight the most common elements of the modality by whichsocial responsibility is

instituted in the non-profit sector. These include: modifying control rights (‘‘who takes part’’ and

‘‘according to whatcriteria’’); including stakeholders in decision-makingprocesses eventually by means

of external networking (how decisions are made and what resources are shared);and making societal

aims explicit (‘‘to what expected effects’’). Results also emphasise that the production of social value

presentschallenges.

Research limitations/implications –Results indicate that social responsibility can be created in

different ways. This study’sanalysis, however, is limited to illustrative cases from thespecific context of

Scotland. First, further researchis needed on solutions that contribute to a practical understanding on

how social value is produced in a variety of contexts. Second, this research does not address what

competences arerequired to develop such solutions. Finally, in this study, the focushas been mostly on

successful cases.More insights on the difficulties and limitationsthat non-investor-owned organisations

face whenimplementing social responsibilitywould be needed.

Practical implications –The implementationof this study’s findings is within the control of practitioners

and can be useful to the sector,as it identifies thefeatures and challenges of governance consistent with

deep formsof socialresponsibility.

Social implications –The paper identifiesforms of organisations that place the creation of socialvalue

at their core. In doing so, this study’s contribution improves understanding around forms of enterprise

that can generatepositive impacts for society,so that society can promote them actively.

Originality/value –This study’s contributionoffers unique case studies using a frameworkthat analyses

social responsibility in a novel way that is by explaining how non-conventional firms design their

governance consistently with the aim of producing value for society and to what extent thisis done by

includingdiverse interests coming from a varietyof stakeholders.

Keywords Case studies, Social responsibility, Social enterprise, Employee ownership,

Cooperative f‌irm, Governance forms

Paper type Research paper

Introduction

For-profit enterprises account for the majority of private firms in our economies and can

potentially play a role in identifying solutions to major social and environmental challenges.

Silvia Sacchetti is based at

the Department of

Sociology and Social

Research, University of

Trento, Trento, Italy, and

European Research

Institute on Cooperative

and Social Enterprises,

Trento, Italy.

Ermanno Tortia is based at

the Department of

Economics and

Management, University of

Trento, Trento, Italy, and

European Research

Institute on Cooperative

and Social Enterprises,

Trento, Italy.

Received 15 April 2019

Revised 26 September 2019

10 December 2019

Accepted 16 December 2019

The authors wish to thank all the

people who have contributed to

the research by explaining their

approach to social responsibility,

the Autonomous Province of

Trento (Italy) for funding the

research, Colin Campbell at

AssistSocial Capital(Edinburgh,

UK) for research support, The

Stirling Management School

(Stirling, Scotland, UK) where

the authors were based at the

time of the research. Usual dis-

claimers apply.

Funding: Casestudies were

supported by an “Outgoing”

researchgrant fromthe

Autonomous Province of Trento

(Italy) on “The use of common

resourcesin co-operative firms.

A comparison between Scotland

and the Autonomous Province of

Trento”. Data are not made

available for external

consultation.

DOI 10.1108/CG-04-2019-0123 VOL. 20 NO. 2 2020, pp. 343-363, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 343

Such enterprises have different impacts, which can be positive or negative. Positive

impacts may include the creation of jobs and income and, to some extent, benefits to

society by providing (to different degrees) solutions to consumer needs and by promoting

local competitiveness. Negative social impacts, however, are generated when businesses

offload unwanted costs on society, such as pollution, isolation and unfair work conditions

and avoiding legitimate taxation (Lyon et al., 2018;Mason et al.,2007;Rygh, 2019). In these

instances, firms appropriatemore value than they produce, thus destroying collectivevalue.

Conversely, the creation of societal value means that a firm produces value in excess of

what is appropriated privatelyby the firm itself (Santos, 2012).

Needless to say, society would be interested in promoting enterprises which can generate

positive impacts [i.e. enterprises which play a role in creating more collective value than the

value they appropriate privately (Rygh, 2019)]. This raises the issue of understanding the

nature and aims of enterprises so that distinctions can be made between enterprises which

create value and those which would –overall –destroy value (Santos, 2012;Jamali et al.,

2010;Toner et al., 2008;Ryan and Lyne,2008).

More broadly, solutions to social and environmental challenges are accommodated by

business, especially larger corporations, on the grounds of corporate social responsibility

(CSR), using a variety of strategies (Galbreath, 2006) and motivations (Kakabadse et al.,

2005). The core idea is that private business can appropriate economic or financial value

and yet have a wider spectrum of aims, including the production of societal value. On the

other hand, diverse applications of social responsibility include organisations, such as

nonprofit organisations, whose explicit aim is the production of social value. Their aims and

governance however have not received equal attention in CSR literature, and when this has

been done authors have focusedon one organisational form at the time (Low and Chinnock,

2008;Mason et al.,2007;Del Baldo, 2019). This article contributes to the literature by

analysing CSR in organisationswhich explicitely construct their governance as a function of

social value production. Specifically, the focus is on non-conventional businesses: social

enterprises (SEs), co-operative firms and employee-owned companies (EOs). The issue to

be examined is how these firms design their governance consistently with the aim of

producing value for society. The criteria which regulate access to strategic decisions and

distribution of results will be discussed.The question is pursued through the investigation of

four case studies involving managers and practitioners along with documentary analysis.

Results suggest that successful non-conventional firms rely on inclusive governance

principles by adapting them to the specific societal needs and resources available, thus

strengthening both their efficiencyand mission.

To illustrate the argument, the article presents four case studies completed between 2011

and 2013 in Scotland, UK. The cases selected include two EOs, one co-operative

enterprise and one SE. These organisations satisfy the concepts and dimensions under

inquiry via theoretical sampling (Yin, 1988), which holds that the enterprises selected must

directly relate to social responsibility objectives and organise access to governance on

principles different to capital ownership. At the same time, the specific institutions in the UK

for the promotion of non-conventional, more inclusive and pro-socialorganisations provided

a favourable domain for the study of social responsibility. Third sector organisations have a

long tradition in the UK, which was one of the first European countries to regulate SEs

(Mason et al., 2007). Moreover, social responsibility policy can find a consistent frame

under the so-called “inclusive capitalism” agenda promoted by the former U.S. Treasury

Secretary, Lawrence Summers; a perspective which also featuredin a governor of the Bank

of England’s speech (Carney, 2014) and is reflected in the renewed awareness of political

representations[1] of co-operative forms of ownership. The case studies have explanatory

and descriptive natures and were aimed at enquiring how non-conventional organisations

design their governance, achieve economic sustainability and demonstrate a capacity to

include stakeholders and produce social value. The methodology does not aim at reaching

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