Week 17 - LEGAL DEETS FOR SOCIAL START-UPS

Image from writtenbysumer.com

This article talks about the legal responsibility that social enterprises cannot overlook while trying to achieve their social goals. Our favourite ice cream store Ben & Jerry's began like most other social enterprises - with two bottom lines: profit and people.  They were fair to employees, easy on the environment, and kind to its cows.  But in 2000, when it got sold to Unilever that is described as “a giant [MNC] clearly focused on the financial bottom line”, it wasn’t because the founders dodged their original social mission, but rather it was because they had a legal responsibility to consider takeover bids, and that particular responsibility forced the sale.

The case of Ben & Jerry’s is said to be what continually haunts social entrepreneurs today.  Taking on the corporate form of an organisation or business entity would mean that one day, they may become the second Ben & Jerry’s.  That is why for the past decade, social entrepreneurs have been calling for new legal forms of organisation for social entrepreneurship all over the world. In the UK, it is recognised that social enterprises are ... However in the US, only certain states like Maryland recognise the B Corp Company, or Benefits Corporation, which focuses on a "triple bottom line" of People, Planet & Profit aka the concept of social entrepreneurship that they term as Non-Profits. And in Singapore, we have something similar to the US' Non-Profits, namely Charities or Institutes of Public Character (IPCs). But these are not social enterprises, and over here, social enterprises face the similar dilemma of not having governance regulations specifically catered for them. They have to follow either the one for Charities and IPCs, or the corporate legal structures. This is extremely difficult for social enterprises because they exist for reasons very different from both of the above. There needs to be a new form of legal structure for social enterprises worldwide, to make things much easier to manage - which could result in the social enterprise sector flourishing and able to do so much more for the world.

If these new forms of legal structures for social enterprises were present at the time Ben & Jerry’s got bought out, then yknow, maybe the outcome may have been different.  But as Ben & Jerry's now demonstrates through their initiatives to try to foster more social entrepreneurs, maybe the only important thing is to do good, regardless of the form of structure(?) - Well, within reason I guess... Definitely take a step back if one is at risk of being involved in some form of legal trouble!

Image from www.forbes.com

I can't help but think back on our Corporate Governance essay assignment where we argued if there should be a separate code of governance for social enterprises here in Singapore to make it easier legally. I mean, imagine having to shut down operations just because a legal requirement was not met. Or worse, imagine being thrown in jail due to a lack in proper legalities when trying to do good with the running of your social enterprise. Shuddering at the thought of that ever happening to me.

Nevertheless, this should not be a discouraging factor stopping anyone who wishes to open a social enterprise of their own someday. (yes - this is definitely directed at me too). I think for me, I'd play it safe. At this young age, let's use our inexperience and lack of knowledge to our advantage here. I'm thinking that, instead of registering our social enterprise as any of the above entities, choose to maybe do something similar to what you have always wanted, but term it as a "project" or "venture" rather than an official social enterprise that has to run by the structures of either a corporate entity or a charity/IPC (this is in reference to the Singapore context)

It may not be anytime soon that I would be setting up a social enterprise (or social "project"/ social "venture"), but if and when I do wish to do that, I am definitely making sure I re-read this all over again so that I can avoid getting into any legal complications with regards to my social enterprise set up!

References

Ip, M. (2012, August 16). Why law is so important for social enterprises. In social enterprise buzz. Retrieved on 2nd February 2013 from http://www.socialenterprisebuzz.com/2012/08/16/why-law-is-so-important-for-social-enterprises/