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(A Reply to the Public Interest Corporation (PIC) Debate)
Ray SheathThis short paper is based on the reflections and experiences of the author as a trustee for 10 years of The Scarman Trust and for 5 years of The Scott Bader Commonwealth (and recently chair of both organizations) and of three bruising encounters in both these contexts with the Charities Commission on trading companies and executive governance. Also relevant experience from 15 years as CEO in venture capital investee companies in the private sector and member of the RSA's Tomorrow's Company enquiry. The Scott Bader experience is particularly pertinent.
Introduction
The crisis in public services is calling for radical solutions but the current political response (to continue to migrate the public sector to the private sector) indicates an "intellectual bankruptcy" given the repeated failures of this policy over many years. Railtrack is the latest casualty. One idea emerging is that of creating a Public Interest Corporation - defined as working for the public benefit, entrepreneurial and trading profitably but where the application of profits and assets is to the promotion of its public objects and crucially an independence from political interference.
The Public Management Foundation (PMF) and Bates Wells & Braithwaite (BWB) have addressed some of the issues of what the nature of the PIC could be, and its immediate application to domains such as water, transport etc. It is suggested that the PIC can be implemented through a company limited by guarantee containing "public interest" provisions in its constitution. But there are many reasons why this may not be a permanent solution not least of which is, as BWB have demonstrated, that it is not possible to set up a PIC and protect it from privatisation under current law
The Social Economy, comprising a multitude of enterprises and other institutional frameworks (mutuals for example) is also suggested as a solution to the crisis. But the Social Economy is in no shape to take on stewardship of the public sector and this is addressed in an accompanying paper "Mentoring the Social Economy".
The Issues
The debate is fragmented, unfocused and has no organizational framework of its own to host and facilitate the debate. BWB has examined private sector vs charities and PMF public sector vs private. BWB has proposed a change to company law to implement the PIC by removing the possibility of privatisation. And it does not help that the government has three separate enquiries of its own into company law reform, charities and co-operative movement. This is un-joined-up government at its best! All this "tinkering with the current system" will not produce the robust challenge to current policy and values that is required
The PIC debate has generated some limited agreement on core characteristics of an enterprise fit for public services as indicated above. But many issues remain -rights of owners of assets transferred, role of membership, stakeholding, governance, incentives for directors and staff, future capital raising, mutuality, the right size for purpose, use of accumulated surpluses, incorporation of tax based services into PIC framework etc and the water is very muddy. Each of the institutional frameworks that exist today were built on a set of core principles. Each has its strengths and weaknesses and lessons that can be learnt from their practices.
The big issue is what are the new set of principles on which to build and how can the debate be prosecuted and new laws established. Some principles can be drawn from our existing institutions but re-definition is required not re-packaging.Towards a Solution
Ironically a solution has been attempted historically not to address public services but to address a crisis seen to be at the heart of the private sector and capitalism. The concept is that of the Trusteeship Enterprise and it has deep intellectual roots from political economy, sociology, psychology, philosophy and religion (Gandhi on economic trusteeship) if the connections could be made. It is very different from ownership of any kind that still lies at the heart of all current systems. In the trusteeship enterprise nobody owns the capital therein whether physical, financial, social or intellectual and a duty is imposed on the participants to use this capital for the benefit of society and not for any narrow interest groups.
A shift from private ownership to trusteeship has been attempted by many "social entrepreneurs" over the last 70 or 80 years - Ernest Bader and family with the Scott Bader Commonwealth, Speddon Lewis with The John Lewis Partnership, Henry Wellcome with the Wellcome Foundation, Ove Arup with the Arup Partnership and many more. These are major corporations that had trusteeship at their heart at their foundation but had to fudge its implementation in law because no institutional framework was available.
They are successful trading organisations but it can be argued that as a result of this fudge their social purposes embedded in trusteeship have been lost and hard lessons can be drawn from the experiences of such enterprises. The complete loss of enterprises from the Quaker community is another example. But trusteeship could be a focus for defining that set of principles and new institutions on which new public service delivery could be built. It must be clear that trusteeship is not common ownership or collective ownership of any kind. It is for profit for society investing profits in the social aims.
The Trusteeship Enterprise
It will not be sufficient to establish new structures to allow trusteeship enterprises to participate in public life. Behaviours are equally important and to import cultures from the public sector, from the private sector, from the co-operative movement from the charity sector etc would be to vitiate the project. Received wisdom has to be challenged, for example that the private sector is efficient and is creative, that the charity sector is altruistic etc. New behaviours which are being explored in the new Social Economy of genuine participation, of servant leadership, of co-creation products and services with customers to meet genuine need should go hand in hand with a new institutional framework. Such behaviours can be supported in the constitutions of trusteeship enterprises. The key feature of the trusteeship enterprise is that all participants at whatever level are equally trustees in common for the time being.
But this is not sufficient and the past has shown how managerialism (working in the interests of managers) and power struggles can work towards an enterprise losing its way. Therefore no enterprise must be an island in its governance. If an enterprise loses its way an independent external power in the governance structure of a trusteeship enterprise will ensure accountability. Participants must be accountable for their behaviours, for achieving their social purposes and for the pursuit of that universal social purpose the development of the individual and individual creativity as expressed through work in the enterprise. In the trusteeship enterprise - no-one is the owner - and the enterprise is simply a means of serving both the customers and its employees and participants in equal measure. It is never for itself.
And performance measurement of the trusteeship enterprise is rooted in these simple statements and not in the asymmetric and myopic performance measures currently plaguing the public services. And Stakeholding can be seen to subsumed by trusteeship - a step on the way to trusteeship.
The Future
If such trusteeship enterprises can take root, then it is not only the public services that will benefit. Enterprises from the other sectors can migrate to a trusteeship form.
Enterprises now being formed in the social economy can migrate to trusteeship and will have institutional roots. Private companies could migrate as envisaged by those early visionaries. Charities could migrate and become independent of government grants and of philanthropy.
It is not diversity of organizational forms that is required, it is diversity of what enterprises and social entrepreneurs can create for society enabled by a new institutional framework for a social enterprise culture. Surplus assets created by trusteeship enterprises can create new enterprises so forming a completely new kind of capital market. The trusteeship concept will have to prove itself over time but the prize is great. A tantalizing prospect opens up of an equity free debt free trusteeship economy.
Meanwhile, how does the debate proceed given that it has to cross all sectoral boundaries and new legislation is its goal? The European legal context also has to be considered. Something like a constitutional convention is required - "an institutional convention" - where people can co-create and co-design with their legislators - a form and expression of political trusteeship. And some existing organization to catalyse it and sponsor it?
The author is willing to discuss and engage with organizations that are interested in the trusteeship enterprise and the idea of an institutional convention.
copies of this document may be obtained from 26 The High Street, Purton, Wiltshire SN5 4AE, UK
Tel: 01793 77 22 14 Fax: 01793 77 25 21
e-mail: john.papworth@btinternet.com
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