5.3 Recommendations

In this Sub-section, certain recommendations are provided according to the findings presented above. These recommendations address national and EU legislators as well as policy-makers.

It is recommended that a tailor-made legal framework for social enterprises in the EU could be further contemplated and could make use of the similar characteristics presented in Chapter 2 concerning stakeholder participation in the governance of social enterprises. The similarities and differences in the participatory governance exhibited in the VSO, Koinsep, and the CIC legal forms may also prove useful in refining and improving the Commission’s operational definition which is applicable to social enterprises in the EU.

This doctoral thesis also recommends that more emphasis is given to developing a framework of legal provisions which facilitates stakeholder participation and which safeguards the maintenance of stakeholders’ interests in decision- making processes. Such a legal framework should, however not be exclusively based on the provision of membership and ownership of shares or the provision of voting rights to stakeholders stipulated – for instance – as a classification (categories) of shares for several types of stakeholders. It should include the entire spectrum of options. These are: (i) ownership of shares and membership rights; (ii) decision and voting rights; (iii) consultation rights; and/or (iv) rights to information. All these rights can be provided to stakeholders. Accordingly, these rights might be developed as stakeholder participatory mechanisms, which are then formal, direct/indirect, and regular/ad hoc. Such a recommendation is also in line with other scholarly findings, which necessitates the consideration of ‘a governance structure that (also) awards rights and powers to social enterprise beneficiaries who are not shareholders (or to their representatives), so that they might push managers to efficiently and effectively achieve the social mission of the organisation.’1

Adding to the aforementioned potential regulatory framework, several institutional factors that are worthy of consideration were identified in this doctoral thesis to affect stakeholder participation, i.e. trust, maturity of the organisation, the motivations of individual stakeholders, and the trade-offs and governance challenges that social enterprises often encounter. It is therefore recommended that those factors are considered as well. For instance, trust could be built if a certain level of accountability, transparency of information, communication, and scrutiny is preserved over the decision-making processes between the principal decision-makers of social enterprises and the stakeholders. Accordingly, tailor-made law could accommodate provisions which introduce legal obligations concerning the reporting to stakeholders and their access to company information. Concrete legal obligations will require social enterprises to indicate how stakeholder participation and engagement are achieved. Such obligations can be found in Regulation 26(1)(b) of the CIC Regulations of 2005 in the UK and in Article 661(6) of the Belgian Companies Code of 1999. Additionally, obligations relating to stakeholder consultation, communication, the establishment of an advisory process prior to decision-making, and scrutinising stakeholder mechanisms that follow-up decision-making could be also formalised in hard law. As such, future research could examine how the formal and informal participation of stakeholders in the governance of social enterprise from various jurisdictions contribute to issues of accountability and to the level of transparency of the decision-makers towards stakeholders.

It is also recommended that the maturity of the social enterprise should be considered in formalising the stakeholder governance of social enterprises stipulated in tailor-made law. This is especially the case for those social enterprises which employ tailor-made legal forms. These have recently been introduced into their legal systems. Such legal forms and corresponding organisations are predominantly young and growing. In particular, it should be considered that young and/or start-up social enterprises might have governance processes which are less organised and standardised, or which are in the process of being gradually organised and standardised. It may also be important for the legislator to consider that these young social enterprises may be more interested in sustaining and maintaining their business in the start-up phase rather than in emphasising the participatory character of their governance. To that end, the introduction of facilities for social enterprises in the start-up phase may enable the promotion of stakeholder participation in governance as well as the trust between decision-makers and stakeholders. Consequently, provisions could be introduced which strike a balance between the need for stakeholders to participate more actively in the decision-making processes of social enterprises and the dependency of social enterprises on adequate financial and other incentives. In this regard, future research can examine how formal stakeholder participation in the governance of social enterprises can become more effective and efficient.

Furthermore, it is recommended that the motivations of stakeholders should be considered when regulating and formalising stakeholder participation in tailor-made law for social enterprises. Academic studies should investigate and acknowledge such motivations in a more in-depth manner. To illustrate, this doctoral thesis encourages further research to examine the intention of stakeholders to participate in the governance of social enterprises and to develop a better understanding of the drivers of stakeholders to participate or to abstain from participation in the decision-making processes of social enterprises. A better understanding and further explanations are also needed concerning the relationship between certain stakeholder groups and principal decision-makers. For instance, certain stakeholder groups may be more (or less) inclined to participate in the decision-making of a social enterprise, depending on the extent of their stakes. Legislators of tailor-made law for social enterprises should consider the aforementioned relationships and distinguish stakeholder participation based on stakeholder groups.

Finally, the governance challenges and daily trade-offs of social enterprises should be considered, as they result in the struggle of the social enterprises’ decision-makers to make appropriate decisions. For instance, transparency and accountability of social enterprises towards their stakeholders concerning decisions might be limited to competition challenges and to the greater trade-off which social enterprises often deal with and which relates to ‘sacrificing social value creation for economic value capture’. Accordingly, the trade-offs and governance challenges of social enterprises should be further researched and considered by legislators and policy-makers of tailor-made law for social enterprises.

This Sub-section demonstrated recommendations that the legislators and policy-makers should consider in accordance with the conclusions of this doctoral thesis. These issues should be considered in national and EU legislation in the development of tailor-made social enterprise laws which promote stakeholder participation in the governance of social enterprises.