3.2.1.1 Participatory governance for social enterprises

The theoretical underpinning of governance in the context of social enterprises has been influenced substantially by various scholars who have developed the L’ emergence de l’ enterprise sociale en Europe (the emergence of social enterprises in Europe – hereafter ‘EMES’) research network’s approach for conducting research on the governance of social enterprises.1 The significance of examining the governance of such enterprises is grounded on various arguments: (i) the important socio-economic role of these organisations as alternative, socially innovative, socially contributing and socially responsible economic actors,2 qualities that require a clear understanding of the nature of social enterprises, their drivers, their key characteristics and their structures (including governance structures); (ii) their potential to contribute significantly to diverse economic schemes by complementing the provision of public goods and services;3 and finally (iii) the currently limited understanding of the new and emergent concept of social enterprises, of their function and of their accountability and responsibility towards third parties, the state and society in general.4

According to the EMES approach, the governance of social enterprises is typified as follows, it is: (i) participatory in nature, including various stakeholders; (ii) not based on the ownership of capital; and finally (iii) independent and autonomous.5 Research on the governance structures of the vanguards of social enterprises, i.e. the cooperatives, has shown that their decision-making is characterised by the application of democratic means.6 However, international scholars elaborating on a theoretical framework for the participatory governance of social enterprises beyond their legal structure7 have noted that, at least in theory, social enterprises have a hybrid character. The hybrid character of social enterprises requires their governance structure to be approached from a different theoretical perspective, such as the stewardship theory for instance, as opposed to the democratic theory developed from research on cooperatives and other non-profit organisations.8

Spear et al. describe a typology of the governance structures of different social enterprises which is based on whether or not board reproduction is associated with the requirement of membership.9 These scholars divide the governance structures of social enterprises into structures that involve self-selection (in organisations in which boards are not elected by members), structures that are associated with membership (in organisations in which boards are directly elected by members) and structures that are hybrid (where the reproduction of boards combines both aspects). Empirical research has added to the ‘multiple- goal, multi-stakeholder’ character of social enterprises, something that has subsequently enabled us to unravel various stakeholder participation mechanisms in the governance bodies of social enterprises.10 The governance structures of social enterprises have also been considered significant for aligning the conflicting objectives and interests of social enterprises’ decision-makers and stakeholders so that mission drifts can be avoided and organisational hybridity can be maintained.11 Finally, appropriate governance is also a way to increase stakeholder legitimacy in decision-making, to stimulate effective performance and to ensure better access to resources.12