Walking the Tightrope

One of the many benefits of Big Society Capital is that its existence forces certain long-standing issues to be dealt with.

The question of ‘private benefit’ in social sector organisations is a particularly itchy open wound which the sector has scratched endlessly over the years. The reason for the pain is that both sides have a point.

On the one hand, goes the argument, if we are to attract the best talent and create the most social value, we must allow the individuals and teams creating that social value to benefit financially. It is reasonable that they should do so – making social ventures work is complex and draining, and requires huge personal commitment. Entrepreneurs must take significant risks and endure myriad pressures – arguably more than conventional entrepreneurs – and they are more, not less deserving of financial reward than conventional entrepreneurs. To deny them this is unjust and will constrain the sector by preventing their involvement.

On the other hand, goes the argument, private gain in social ventures is beset with moral hazard. There are inherent conflicts-of-interest in trying to create social value (often with the support and involvement of public funds) and trying to create private gain. There is a trade-off between surpluses extracted to enrich individuals and surpluses re-invested to promote the social purpose of the venture. Private benefit is for private enterprise and if we muddy the waters we confuse motivation and lose trust.

Big Society Capital could have taken the easy route, to define social sector organisations by legal form and effectively deny the existence of what it has called a “for-profit social social sector organisation”. Instead, it has chosen the difficult route – designing a tightrope to convey it between the two reasonable arguments that have been made for years by these opposing camps.

What a classy move. Let’s hope that the market accepts that BSC may need some flexibility to make adjustments to the set-up of their tightrope in response to changing market conditions and experience. Adjustments to the tightrope should be seen as a good thing, reflecting the reality that a rope that might be correctly set now may need maintenance if it is to remain taut.

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