Governance failure in social enterprise

Abstract

This article aims to evaluate the effectiveness of the participative, democratic model of governance commonly found within social enterprises. This model has its origins in the broader not-for-profit sector where it is widely adopted. A core assumption of this governance form is that it ensures that the organisation will take a range of views into account through involving stakeholders at the highest level of decision making. This assumption is examined through an analysis of a social enterprise that went into administration following a breakdown in its governance. The data include internal documents and observations from a key participant. The findings suggest that the democratic model can be subverted by powerful actors who wish to retain their positions regardless of the impact on the organisation. A contrast is drawn between this case and governance problems in the private sector which have resulted in business failure. Although it can be argued that there is a divergence in the motivation of actors within each sector, the threat is found to be the same with regard to organisation survival. This article concludes by offering thoughts on establishing a potential solution to prevent such abuses in other social enterprises.

Keywords:

• social enterprise
• governance failure
• stakeholder involvement