Social enterprises in the EU (IVOR nr. 111) 2018/3.1.4.1:3.1.4.1 Participatory governance

Social enterprises in the EU (IVOR nr. 111) 2018/3.1.4.1

3.1.4.1 Participatory governance

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CORE, Microstart and Volkshuisvesting are cooperatives with a social purpose, which operate in three different industrial sectors, respectively, in the energy sector, the financial sector and the social housing sector. All of the examined cooperatives with a social purpose have adopted the VSO legal label by incorporating the VSO legal requirements into their AoA. The VSO legal label can be adopted by social enterprises operating in different sectors. However, in particular industrial sectors, e.g. the housing sector, the VSO legal label has been prescribed for organisations that implement the regional public policy regarding social housing.

The governance of cooperatives is characterised by a standard correlation between membership/shareholdership and decision-making. The general assembly of the members/shareholders is the competent organ to elect the board members. Therefore, we contend that the traditional self-selecting governance models, which are characterised by a powerful board of directors comprised mainly of directors who are not also members/shareholders, is not the prevailing model in cooperatives with a social purpose. In the governance models of cooperatives with a social purpose, the decision-making organs are closely associated with the rights that membership/shareholdership confers. However, they are not characterised by the principle of democracy per se as it is expressed by the concept of ‘one man, one vote’. Contributing to the taxonomy of Spear et al.,1 we argue that cooperatives with a social purpose in Belgium, showcase hybrid governance models in which self-selecting governance and membership governance schemes are combined.2 Thus, we identify the following types of cooperatives with a social purpose that apply hybrid governance schemes.

Those VSO cooperatives, which applied a voting cap in the decision-making processes of the general meeting

(i)

Cooperatives with a social purpose that apply a regulated 10% cap on the exercise of voting rights of the cooperative members/shareholders according to the VSO legal requirements. The reduction of the voting rights of the members/shareholders in the form of a regulated cap is required by the VSO legislation. Even though, the voting cap differs from the principle of democratic participation embodied in the ‘one man, one vote’ rule, it introduces a hybrid decision-making model which allows members/shareholders to achieve balance and democracy in the decision-making processes of the general assembly. At CORE, the voting cap incorporated in the AoA reduces the ordinary voting rights that are attached to the cooperative shares to a certain extent, i.e. one tenth. This 10% voting cap ensures a balance between the voting power of Type A and B shareholders – which are legal persons that can be only represented by one person at the general assembly – with the voting power of Type C shareholders, i.e. the growing number of students-volunteers who represent themselves personally at the general assembly. At Volkshuisvesting, the 10% voting cap only applies to members/shareholders of the private domain, whereas the members/shareholders of the public domain may always exercise their voting rights in full. Resuming, with respect to the implementation of the legal VSO requirement which imposes a 10% voting cap to the exercise of the voting rights, we identify:

(i)

cooperatives with a social purpose which apply a 10% cap to the exercise of voting rights but which cap is reduced to 5% for employees- members/shareholders (CORE);

(ii)

cooperatives with a social purpose, which do not allow employee participation, but which do apply a 10% voting cap to the exercise of voting rights of members/shareholders (Microstart); and

(iii)

cooperatives with a social purpose, which do not allow employee participation, and where the 10% cap only applies to members/shareholders belonging to the private domain (Volkshuisvesting).

Those VSO cooperatives, which strived for unanimity at the board level

Even though the implementation of the 10% voting cap has been introduced in the AoA of the examined cooperatives with a social purpose, it follows from the interviews that at the board level and general assembly level, the board members and the members/shareholders strive for unanimity and consensus. At CORE, a director mentions ‘We try to vote as few times as possible, I think we almost never really vote (…). We vote that we all agree, we discuss the problem and we go for reaching consensus. Until now we didn’t have situations in which we had to really vote’ (Interview with YG, 13 November 2014). Both Microstart and Volkshuisvesting also strive for a unanimous majority in the general assembly (Interview with MP, 18 February 2015; Interview with LH, 16 June 2015).

Those VSO cooperatives, which employed hybrid governance models at the board level

These are cooperatives with a social purpose that appoint directors who repre-sent various types of members/shareholders. In addition, the general assembly can appoint independent directors to either: (i) supervise and control the board of directors; (ii) provide expertise with respect to legal, financial and management issues, or with respect to the fulfilment of the social purpose; or (iii) represent any supportive organisations to the operation of the cooperative with a social purpose.

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