Ethical Capital: The Neglected Aspect in the Conceptualisation of Social Enterprise Mike Bull, Manchester Metropolitan University Rory Ridley-Duff, Sheffield

Ethical Capital: The Neglected Ethical Capital: The Neglected

Aspect in the Conceptualisation of Aspect in the Conceptualisation of

Social EnterpriseSocial Enterprise

Mike Bull, Manchester Metropolitan UniversityMike Bull, Manchester Metropolitan University

Rory Ridley-Duff, Sheffield Hallam UniversityRory Ridley-Duff, Sheffield Hallam University

Doug Foster, University of SurreyDoug Foster, University of Surrey

Pam Seanor, University of HuddersfieldPam Seanor, University of Huddersfield

Social Enterprise Research Conference – 26th – 27th June 2008

Objectives of the paperObjectives of the paper

o This paper is very much a tentative piece of theorising that brings together our (different) views This paper is very much a tentative piece of theorising that brings together our (different) views around the conceptualisation of social enterprise to initiate and stimulate further researcharound the conceptualisation of social enterprise to initiate and stimulate further research

o What we are trying to do here is explore the conceptualisation of social enterprise from a new What we are trying to do here is explore the conceptualisation of social enterprise from a new perspective, a new frame of referenceperspective, a new frame of reference

o How do we frame the way we look at social enterprise? - what lenses do we currently look How do we frame the way we look at social enterprise? - what lenses do we currently look through and what might an alternative lens look like?through and what might an alternative lens look like?

o We introduce the conceptualisation of ethical capital as the neglected aspect in the We introduce the conceptualisation of ethical capital as the neglected aspect in the conceptualisation of social enterprise, in looking through this lens we think we have a story conceptualisation of social enterprise, in looking through this lens we think we have a story worth telling!worth telling!

ContextContexto What is different about Social Enterprise from the Private Sector?What is different about Social Enterprise from the Private Sector?

o What is blurring at the boundaries in the mix between non-profit and profit? What is blurring at the boundaries in the mix between non-profit and profit?

o What is distinctive? Where does CSR and social enterprise differ?What is distinctive? Where does CSR and social enterprise differ?


o What is blurring at the boundaries in the mix between non-profit and profit?What is blurring at the boundaries in the mix between non-profit and profit?


o What current conceptualisations are there of Social Enterprise?What current conceptualisations are there of Social Enterprise?

o Primarily Social?Primarily Social?

o Entrepreneurial income generation – ‘Trading’?Entrepreneurial income generation – ‘Trading’?

o Building Social Capital?Building Social Capital?


o What is blurring at the boundaries in the mix between non-profit and profit? What is blurring at the boundaries in the mix between non-profit and profit?


o What current conceptualisations are there of Social Enterprise?What current conceptualisations are there of Social Enterprise?

o Primarily Social?Primarily Social?

o Entrepreneurial income generation – ‘Trading’?Entrepreneurial income generation – ‘Trading’?

o Building Social Capital?Building Social Capital?

o Are the current conceptualisations comprehensive? Are the current conceptualisations comprehensive?

o Have we all the ingredients?Have we all the ingredients?

o Is ethical capital one ingredient that is missing?Is ethical capital one ingredient that is missing?

Context - Ethical Capital ?Context - Ethical Capital ?

o Tim Smit (Eden Project) – Voice 07 Tim Smit (Eden Project) – Voice 07

One of the most interesting things I have come across recently is that One of the most interesting things I have come across recently is that

a lot of people in the city reckon that corporate life as we know it is a lot of people in the city reckon that corporate life as we know it is

going to be dead in thirty years. And I would say that Eden would be going to be dead in thirty years. And I would say that Eden would be

a good example of why. When I look at my top executives, the top a good example of why. When I look at my top executives, the top

eight people who work for me are all people who have decamped eight people who work for me are all people who have decamped

from very successful jobs in very successful organisations, because from very successful jobs in very successful organisations, because

they no longer want to work for corporations where there is no they no longer want to work for corporations where there is no

ethical capitalethical capital, and this is happening all over the place. , and this is happening all over the place.

Nowadays 40% of school leavers apparently do not want to work for Nowadays 40% of school leavers apparently do not want to work for

a corporation. a corporation.

[emphasis [emphasis

added]added]

Context Context

o Physical capital (natural resources) Physical capital (natural resources)

o Economic capital (financial resources)Economic capital (financial resources)

o Human capital (people’s degree of instruction)Human capital (people’s degree of instruction)

o Intellectual capital (an organization’s capacity for innovation) Intellectual capital (an organization’s capacity for innovation)

and and

o Social capital (levels of activity of civil society)Social capital (levels of activity of civil society)

andand

o Ethical capital (levels of activity of values)? Ethical capital (levels of activity of values)?

Conceptualising Ethical CapitalConceptualising Ethical Capital

o ‘‘There is one and only one social responsibility of business – to use its There is one and only one social responsibility of business – to use its

resources and engage in activities designed to increase its profits so long as resources and engage in activities designed to increase its profits so long as

it stays within it stays within the rules of the gamethe rules of the game, which is to say, engages in open and , which is to say, engages in open and

free competition without deception and fraud.’ free competition without deception and fraud.’

(Friedman, 1970)(Friedman, 1970)

This prescription for the way to behave has left society with a low ethical baseThis prescription for the way to behave has left society with a low ethical base


o ““It is contended that modern business theory, as represented by the Neo It is contended that modern business theory, as represented by the Neo

Classical economic paradigm, has established a moral code of business Classical economic paradigm, has established a moral code of business

based on efficiency of outcome and the assumed link of efficiency to self-based on efficiency of outcome and the assumed link of efficiency to self-

interested behaviour. The result is markets as the arbitrators of ethical interested behaviour. The result is markets as the arbitrators of ethical

outcomes, and profit maximization as the ultimate moral code” outcomes, and profit maximization as the ultimate moral code”

(Keller 2007)(Keller 2007)

2 points to consider here;

(1) A world dominated by self-interested behaviour

(2) A world dominated by a market ‘system’

o ““the market frees individual acquisitiveness from moral, social and/or religious constraints. the market frees individual acquisitiveness from moral, social and/or religious constraints.

While this acquisitiveness can be a source of great energy and creativity, it is also a turbulent, While this acquisitiveness can be a source of great energy and creativity, it is also a turbulent,

disruptive, and potentially disintegrative force. Moreover, the market is believed to contain an disruptive, and potentially disintegrative force. Moreover, the market is believed to contain an

expansionary dynamic, so that unless it is contained it progressively invades and colonizes expansionary dynamic, so that unless it is contained it progressively invades and colonizes

other spheres of our social lives;other spheres of our social lives;

o It releases self-interest from moral restraintsIt releases self-interest from moral restraints

o It erodes all social ties other than purely economic ones and/or converts social It erodes all social ties other than purely economic ones and/or converts social

relationships into instrumental ones ("commodifies" them)relationships into instrumental ones ("commodifies" them)

o It promotes a preoccupation with narrow individual advantage at the expense of It promotes a preoccupation with narrow individual advantage at the expense of

responsibility to the community or social obligationsresponsibility to the community or social obligations

o It substitutes competition for voluntary cooperationIt substitutes competition for voluntary cooperation

o It favours materialistic or hedonistic values.” It favours materialistic or hedonistic values.”

(Maitland 1997)(Maitland 1997)


o There is hope!There is hope!


o There is hope! – Social Enterprise?There is hope! – Social Enterprise?


o There is hope! – Social Enterprise?There is hope! – Social Enterprise?

o How do we bring this discussion and theory from the How do we bring this discussion and theory from the

literature into the social enterprise debate?literature into the social enterprise debate?

o Where are the boundaries and where can we draw Where are the boundaries and where can we draw

differences from the behaviour of business to the differences from the behaviour of business to the

behaviour of social enterprise?behaviour of social enterprise?

o What perspectives can we offer?What perspectives can we offer?

Alter (2004) Sustainability SpectrumAlter (2004) Sustainability Spectrum

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Economic Rationality(Performing Tasks Efficiently)

Social Rationality(Developing Equitable Relationships)

Charitable EnterprisePrivate Enterprise

Social Enterprise

Equilibrio/Balance"Blended Value"

Intellectual Capital

Economic Capital Social Capital

Virtue Ethics Normative Ethics Critical Ethics Religious Ethics

HolisticIndividualistic Hegemonic Collectivist

Moral Agency & the Moral EnterpriserMoral Agency & the Moral Enterpriser

o Becker (1963) – Moral Entrepreneur: two types –Becker (1963) – Moral Entrepreneur: two types –o Rule-EnforcerRule-Enforcer

o Rule-CreatorRule-Creator

o Hart (1963) – Modes of Morality: two types –Hart (1963) – Modes of Morality: two types –o Conventional MoralityConventional Morality

o Critical MoralityCritical Morality

o Combination of Becker/Hart to suggest the Moral Enterpriser: again, Combination of Becker/Hart to suggest the Moral Enterpriser: again,

two types –two types –o Conventional and Enforcing Moral EnterpriserConventional and Enforcing Moral Enterpriser

o Critical and Creative Moral EnterpriserCritical and Creative Moral Enterpriser

ConclusionsConclusions

o The objective of the paper was to present the neglected aspect in The objective of the paper was to present the neglected aspect in

the conceptualisation of social enterprise.the conceptualisation of social enterprise.

o A new frame of reference in ethical capital may add to the list of A new frame of reference in ethical capital may add to the list of

characteristics that help define this organisational formcharacteristics that help define this organisational form

o The business world is changing – the rules of the game are shifting The business world is changing – the rules of the game are shifting

– CSR and social enterprise reflect the changing times in which we – CSR and social enterprise reflect the changing times in which we

live – the primary purpose of each organisational form may not live – the primary purpose of each organisational form may not

simply be ‘for profit’ or ‘for social’ – ethical capital may add insight. simply be ‘for profit’ or ‘for social’ – ethical capital may add insight.

Discussion?Discussion?o We have presented a new perspective in the We have presented a new perspective in the

conceptualisation of social enterpriseconceptualisation of social enterprise

o Is this the changing appetite to stimulate peoples’ taste buds for Is this the changing appetite to stimulate peoples’ taste buds for

a more ethical code of conduct?a more ethical code of conduct?

o Are there benefits to social enterprises that this Are there benefits to social enterprises that this

conceptualisation may allude to?conceptualisation may allude to?

o This paper has bridged from practice into theory – can it go back This paper has bridged from practice into theory – can it go back

again?again?

o Can ethical capital be capitalised on in social enterprises?Can ethical capital be capitalised on in social enterprises?

o And . . . How can we analyse or measure ethical capital?And . . . How can we analyse or measure ethical capital?

Documents

Ethical Capital: The Neglected Aspect in the Conceptualisation of Social Enterprise Mike Bull, Manchester Metropolitan University Rory Ridley-Duff, Sheffield