3.6.3.4 The effect of legally prescribed stakeholder participatory governance on the social enterprises and on stakeholders

It was noted earlier that only two out of nine case studies (Case Studies 3 and 4) implemented the formal participation of stakeholders in practice. In Case Study 3, membership was a result of coercive necessity in compliance with the legal environment. As such, membership only materialised as an actual cooperation between stakeholders and social enterprises in Case Study 4. On the contrary, in all the examined case studies, the informal participation of stakeholders was implemented in practice.

In the case studies in which formal participation was not fully implemented in practice, the governance model of the social enterprise was open to stakeholders or to new membership, such as stakeholder membership. However, the principal decision-makers gave emphasis to expanding the business rather than including stakeholders (Figure 3.10). In fact, in these examined case studies, governance tended to be concentrated either in the hands of the principal decision-makers (that would make up an ‘oligarchy’), or in the hands of the active shareholders (Figure 3.10). Only in Case Study 3, membership was implemented because of necessary compliance with the legal framework, without being translated fully into the actual participation of a certain type of stakeholder in all levels of governance due to a legal constraint.

In contrast, in Case Study 4, in which formal participatory governance of the organisation was implemented in practice, membership and stakeholders’ participation in governance was based on trust, respect, and open communication (Figure 3.11). As such, membership was encouraged among stakeholders, including new clients and new employees, on the basis of various incentives such as: (i) support for the capital; (ii) contribution to the social purpose; and (iii) a new insight into the functioning of the organisation (Figure 3.11). It also resulted in the expansion of ownership of shares and the adjustment of the governance structures at the level of the general meeting or the board of directors (management board) to accommodate the stakeholders’ representatives. Similarly, the development of informal stakeholder mechanisms in all the examined social enterprises resulted in the alteration of their organisational functioning to comprise direct and regular informal stakeholder mechanisms which accommodated and solicited the stakeholders’ feedback.

Such formal and informal processes resulted in the development of new roles for various types of stakeholders in the organisational functioning of the examined case studies, i.e. as members, decision-makers, supervisors, consultants, controllers, and recipients of information (Figure 3.11). They also resulted in: (i) the development of new obligations and responsibilities for the stakeholders, leading to stakeholder empowerment and inclusion in organisational processes; (ii) the integration of various types of stakeholders, i.e. vulnerable societal groups, such as the disabled or students-employees, into organisational activities and other empowering roles; and (iii) the inclusion of society and community into entrepreneurship (Figure 3.11). Interaction through participation and scrutiny accommodated the introduction of community and societal values into the organisational activity. This interaction generated more safeguards for the maintenance and implementation of the social and community objectives that social enterprises were bound to fulfil.