5.2.3.2 The effect and the effectiveness of participatory governance

The empirical findings of the case studies in Chapter 3 indicate that the governance as prescribed by tailor-made law, i.e. the formal participatory governance, is not always fully implemented in its practice. The findings show that informal, direct but regular processes have been more frequently developed in the organisational governance and functioning of social enterprises to accommodate and solicit stakeholder feedback, advice, and consultancy in decision-making.

The empirical findings also lead me to conclude that the participatory governance structure of social enterprises does not always comprise a voting power for certain types of stakeholders, i.e. employees in the decision-making processes, that stakeholders can acquire through the exercise of voting rights. As such, the participation of stakeholders might be a symbolic one rather a real one. Neither is participatory governance structure always characterised by the ‘internalisation’ of certain types of stakeholders into membership and their active participation in various levels of decision-making processes.

At the board level, the empirical findings demonstrate that the boards of social enterprises are likely to exhibit various governance models in their structure, i.e. a stewardship model of governance, a democratic and representative model of governance, or a combination of both. Accordingly, the boards of social enterprises recruit members on the basis of expertise and skill, or on the basis of the representative status of the stakeholders, or a combination of both. Indeed, when the boards of social enterprises exhibit a stewardship model for social enterprises, they move away from inclusive representation at the board level, using managers and/or directors with a specific skill set that can more effectively manage the social enterprise. Consequently, the governance structures of social enterprises could indeed be divided into: (i) board structures that involve the self-selection of decision-makers; (ii) board structures that are associated with membership in organisations in which boards are directly elected by members; and (iii) board structures that combine both aspects, i.e. self-selecting governance and representation of membership.

At the general meeting level, the acquisition of stakeholder membership may materialise as a coercive necessity, due to the necessity of complying with the legal and institutional framework, or it may also materialise as an actual voluntary cooperation between the principal decision-makers and stakeholders based on their decision to involve stakeholders. In both cases, the formal multi- stakeholder character can be translated into actual participation of stakeholders in the governance of a social enterprise, depending on the decisions of the principal decision-makers and the motivations of individual stakeholders to actually participate.

The structure of participatory governance tends to depend on the autonomous decision of the principal decision-makers within legal frameworks that often permit, require, or exclude the involvement of one or more categories of stakeholder in the governance of social enterprises. The implementation of the formal participation of stakeholders in the governance of the examined social enterprises tends to be influenced by the decisions of the principal decision- makers. The principal decision-makers decide to develop governance structures which do not include stakeholders in the ownership and membership and thus in the governance of the social enterprises.

This finding is reflected in the majority of the case studies, i.e. Case Studies 1-2, 5-6, and in Case Study 8. In these case studies, the application of the formal participatory governance does not tend to be influenced by compliance to the tailor-made legal provisions, which allow/permit but do not require stakeholder participation. An exception is found in Case Study 4. In Case Study 4, although the tailor-made legal framework allows/permits but does not require the participation of one stakeholder type, i.e. the employees, formal participatory governance is fully applied in practice for various types of stakeholders in all the decision-making levels of the examined social enterprise. Additionally, in Case Study 3, the formal participation of a certain type of stakeholder is stipulated as a legal obligation/requirement, and it tends to be applied in practice in compliance with the law. In Case Study 7, although a formal participation of stakeholders in the membership of the organisation is applied, the participation of stakeholders in the governance remains inactive.

Other than the decisions of the principal decision-makers, the motivations of individual stakeholders to actually participate – by exercising their rights – are found to be crucial to the implementation of formal stakeholder participation. Both the decisions and the motivations of the principal decision-makers and stakeholders are influenced by: (i) the factor of trust between the principal decision-makers and stakeholders, but also the principal decision-makers’ trust with respect to the legal and institutional environment and the stakeholders’ trust concerning the growth and viability of the social enterprise; (ii) the level of maturity of the organisation, i.e. the ‘youth’ of the tailor-made legal forms for social enterprises, which are newly introduced legal forms; and (iii) behavioural factors related to the personal motivations and individual urges of stakeholders to participate, e.g. emotional engagement, personal responsibility, and level of commitment; (iv) several trade-offs and governance challenges that social enterprises encounter in their daily practice and operations. These are tensions and dilemmas encountered by the decision-making bodies of social enterprises due to their hybrid character, regardless of the tailor-made legal form. They result in compromises and the struggle of the social enterprises’ decision-makers to achieve a balance between their social and commercial outcomes. For instance, it was shown that social enterprises should strive to achieve a balance in maintaining stakeholder membership and legitimacy while avoiding a mission drift if the control of the organisation were to change to include stakeholders with more commercially driven interests. These factors influence the governance structures of those of the examined social enterprises, which do not apply in full formal stakeholder participation.

Meanwhile, the development of various kinds of informal and direct stakeholder participation mechanisms demonstrates that the examined social enterprises tend to cooperate actually with stakeholders. The informal cooperation takes place on a regular basis by means of participatory stakeholder mechanisms, which are not provided for in law but which are internally developed in the social enterprises’ organisational functioning to accommodate stakeholder feedback in decision- making. They comprise the broader commonly occurring categories of the following types of participatory mechanisms: (i) written or oral communication (by email or through phone calls); (ii) participation in consultation meetings with decision-makers; (iii) technology interactions (newsletters, websites, social media); (iv) stakeholder thematic events; (v) stakeholder meetings; (vi) stakeholder committees; (vii) open governance processes for stakeholders who are non-members; (viii) satisfaction surveys; and (ix) consultation processes (often for technical matters).