The emergence of social enterprise--Is Social Enterprise Sustainable?--III.C

That corporate form represents an identity distinct from its owners and managers is a legal principle so basic that we have lost sight of its significance.   Limited liability, fiduciary duties, the maximization of shareholder value as opposed to the personal enrichment of insiders—these corporate clichés are all normative institutions designed to establish a corporate identity that is more than the sum of its parts.  They are as much an extension of naturally occurring emergent form as Aristotle’s model of a city partnership or our internal sense of self.  

Isolating the root of corporate identity in a programmatic model of emergence opens dramatic new possibilities in both our theory and practice of organizational life.  For the burgeoning research in managerial leadership and systems theory, the embedding of emergence within corporate form provides an organic basis for integrating dynamic systems research into corporate life.  Moreover, it adds a new dimension to our understanding of organizational law, which to far too many scholars seems little more than a routinized cliché unworthy of serious academic attention.

What professed business experts have yet to realize is that the same creative impulse we see in the creative arts animates all forms of corporate life; the Renaissance corporate consultant who nurtures an appreciation for science, mathematics, literature and art actually has a competitive edge in understanding the nuances of  corporate design.

In itself, a metaphorical model of emergent properties does not necessarily entail an ethical commitment, any more than a hybrid form of collective properties emerging from connected atoms given a moral character to water, ice and steam.  However, the creation of a coherent emergent from human elements is a different environmental predicate, and the result is a complex and seemingly contradictory array of identities all deriving from the impulse to rise above the mundane.  On the individual level, our conscious ratio of difference between whole and part takes shape in normative  values that resist reduction to otherwise deterministic forces; we strive for immortality, curb our appetite for food, deny that smoking will hurt us, negate our sexual drives and engage in sex without regard to consequence.   

On a wider scale, groups of individuals create connections and constraints that not only extend these personal values but create new collective properties.  For instance, whereas economies tend to exhibit turbulent swings and the scale-free concentration of wealth in the hands of the relative few, we create models of society designed—at least in theory—to generate a steady rise in wealth distributed to all and health care is not an allocation of scarce assets but a fundamental human right.

For a non-state corporate entity, whether nonprofit or for-profit, ignoring the embedded ratio of difference between whole and part can have dramatic consequences, particularly in the form of unwanted and burdensome government regulation.  It is here where the reasoning of today’s business managers and theorists has had its greatest negative effect.  The image of a unity distinct from its constituent parts is encoded in the DNA of our for-profit corporate entities, yet business leaders persist in reducing corporate identity to the material enrichment of  its executives and shareholders. The resulting backlash—both in public criticism and waves of new expensive and rigorous ethics rules—is akin to the reaction against the Roman Empire when it conflated Aristotle’s metaphor of civil society with paganism and later, Christianity; each represents the reduction of a higher unity to the private privilege of one part.

A more sustainable corporate strategy—in the sense of maintaining the autonomy of the corporate enterprise as a self-subsisting and self-regulating organizational form—recognizes that the rules and routines of corporate form exist to do more than to generate and allocate financial return.  The business partnership already functioned as an aggregate of profit-seeking individuals, and that model is no longer the norm.  Every element of corporate identity—its name, its brand, its people, its products—should in some way work to reinforce the image of a whole beyond the parts; the more that people perceive the business primarily as a scale-free aggregation of profits enriching insiders, the greater the likelihood that society will at some point act to make the business something more.
 
A similar principle applies to nonprofit identity.  The difference between nonprofit and for-profit entities is one of degree, not of kind—they are both extensions of the corporate model of emergence, albeit with distinct wells of attraction.  Whereas for-profit entities tolerate a certain, though not all-encompassing, degree of commerce and personal enrichment, within the nonprofit universe the image of a form beyond finance and private interests tends toward the absolute. 

Above: Ellen Dissanayake examines art, identity and design

This means that nonprofit design requires even more rigorous attention to rhetorical effect.  Nonprofit and other ostensibly charitable organizations that define themselves primarily as businesses—as is all too often the case with organizations attracted to social enterprise by the mimetic bandwagon effect—risk fostering the suspicion that they have in some way betrayed the core values of their higher mission, regardless of whether there is actually any wrongdoing.   Conversely, nonprofits that proceed as if they have no relation to the mundane equally generate distrust, inasmuch as people intuitively grasp that the higher order cannot emerge without connections and constraints.

As a hybridizing algorithm, social enterprise is an adaptive response to the loss of coherence in corporate identity. A variety of factors have worked together to shape the movement as it current exists—mimetic mirroring of dot-com and 2.0 rhetoric, the immediacy of electronic technology, the integrative effects of globalization.  The most influential factor, however, is the diffusion of corporate form itself.  What had once been the prerogative of priests and civic leaders has become a social norm; we now live in a world where plugging into the hybridizing algorithms of corporate form is an all too familiar experience.  In this environment bifurcating the world into profit-maximizing businesses and idealized nonprofits becomes unsustainable; it literally does not make sense to a rising generation accustomed to joining things together so as to create something new.

But this does not mean that social enterprise is itself a wholly novel concept.  It is instead a reflection of what already exists.  Ever since modern corporate law formalized a conceptual diversion between nonprofit and for-profit entities, movements have emerged to infuse a public spirit throughout the whole of our organizational system. As we noted earlier, social enterprise is just latest of these movements, and like its predecessors it lacks a structural basis for embracing hybrid values.  Understanding social identity as a programmatic model of emergence eliminates this problem.  In today’s corporate world every enterprise becomes a social enterprise once it creates a legal entity or recognizable brand.

That people feel the need to advocate for hybrid ventures is a symptom of how familiarity has obscured our perception of all forms of corporate identity. At base, social enterprise as a discrete movement is akin to adaptive morphogenesis in the biological realm, where forms evolve in the gap to facilitate missing constructive behaviors.    Among animals this is, it would appear, an unreflective process, but within human society—itself a means of modeling adaptive transformation—there is at least the potential for self-awareness.  

The core question for facing social enterprise is not so much whether it will last but how best to exhibit what corporate life should be.  At a certain level the continued existence of social enterprise is more or less guaranteed, much like there are still a few priests who speak Latin, charities called settlement houses or NGO workers who self-identify with civil society.  But social enterprise ostensibly seeks more than mere survival as a semantic trace.  If social enterprise is to be truly sustainable, it must find a way to become more than just the latest permanent revolution to experience a turbulent upswing and precipitous decline.

One common suggestion for increasing the impact of social enterprise is to create new separate social institutions—a social stock exchange, social venture capital funds, a social legal entity.  As advocates note, such endeavors could offer substantive advantages for individuals who want to self-identify as social entrepreneurs.   Besides signaling their values and providing a standardized structure for integrating commercial business with social benefit, formally recognizing a discrete social enterprise sector could result in a less costly and burdensome operating environment than currently exists—social entrepreneurs arguably would not face the same pressure to maximize solely the financial value of shares, nor would they have to comply with the often arcane restrictions on business activity and profit distribution imposed on tax-exempt charities.

Yet for all the strategic benefits of separate social entities, the movement’s greatest contribution would be to remind us what corporate identity already is—and then fade away.  The first and arguably most important step toward this end would be to stop speaking of a division between “social” business and existing non-profit and for-profit structures.  Not only is the distinction untenable, it effectively concedes that social enterprise is a niche unto itself; by assuming a conceptual divide between social and business values, it frames the discussion in a way no argument for hybrid enterprise can win.  Instead, advocates for the movement need to explain why existing entities already embody hybrid values—and how our failure to grasp this fuels the regulatory inefficiencies and PR debacles that ventures of all types seek to avoid.

The movement would also benefit from explaining the process of transformation that is central to all corporate identity.  All form blends separate elements into a greater whole; to maintain their integrity, for-profits and nonprofits alike need to learn the art of corporate composition.  That some reduce business to shareholders while others view nonprofits as non-market entities indicates the degree to which the leaders of each so-called sector do not comprehend the objects of their ostensible expertise.

Beyond rethinking group identity, social enterprise could also secure its legacy by highlighting the social dimension of other organizational technologies.  As noted in an earlier section, society is a fractal concept; we have used the ratio of difference between whole and parts to create a universe of self-similar hybrids. From this perspective speaking of a double- or triple-bottom line is redundant; money and stock are themselves intrinsically social media, with their value emerging out of complex interactions and constraints. Once again, the methodology must shift from differentiation to inclusion—instead of grafting social concerns onto other metrics, what we need instead is to explain how social and financial values are the same.    

There are, of course, other useful applications of corporate identity as a pragmatic model of emergence, but their overall effect should be the same:  to make social enterprise a transitional form.  It brings together values that we should not have torn apart, and once we learn its deepest lesson it will become obsolete.  While this might seem like a failure to those who champion the movement as a permanent revolution, disappearance in this context would be a mark of its success. It’s one thing to change how people talk about groups, quite another to transform how we think.

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