Civil society, Social Enterprise, The Third Sector: governance and democracy

Jean Louis Laville, Dennis Young, Philippe Eynaud
Civil society, Social Enterprise, The Third Sector: governance and democracy

Introduction to Part 1

This book examines governance, civil society and democracy across a full spectrum of societal structures, recognizing that governance is changing at all levels. The first part of the book starts with a traditional focus on the governance of CSOs though not too narrowly on the governing boards of these organizations per se. Throughout these first five chapters, the themes of change, complexity and blurring boundaries predominate. CSOs are discovered to embrace an increasing variety of complex organizational forms, a hybridization of traditional forms that challenge existing modes of governance and a call for new approaches. This complexity also manifests itself at the interface of civil society and government, as traditional modes of collaboration are challenged by public policies demanding greater accountability and CSOs are sometimes forced to take a more adversarial posture. The nature of feedback between government and civil society changes as a result, altering governance at both levels. At the very least, the “boundary spanning” role of nonprofit governing boards becomes increasingly important, changing the character of internal governance of CSOs over time. The modern environment of public accountability is also found to affect the style of civil society organization governance. CSOs necessarily become more rationalized and business-like in nature, possibly squeezing out some of the democratic character traditionally associated with nonprofit governance. But things are not so simple as that; indeed our authors find several different styles of nonprofit governance continuing to operate side by side in the population of CSOs, some more democratic, some more managerialist than others. Going further, the character of CSOs themselves is found to be evolving, with the boundaries between one CSO and another becoming less distinct. Thus, the focus of CSO governance is moving from the domain of organizational governance to one of governing networks of CSOs as collectives. This indeed is a new frontier where new kinds of governance structures seem to be needed to provide both internal governance of CSO clusters, as well as appropriately framed feedback between civil society clusters and the public sector. Finally, the evolution of civil society governance from traditional board governance of individual organizations to boundary spanning and network governance is seen to have profound implications for societal governance as a whole. For example, some of our authors observe that as societies become more democratized through technology, globalized networking and economic development, the nature of the social contract itself changes, with greater expectations placed on government for accountability, performance, transparency and fairness. This in turn underwrites another feedback loop between citizens and CSOs, with expectations that the latter will become more democratic and responsive.
Research literature as well as trade publications intended to guide practice on the governance of CSOs (CSOs) have historically focused on the role of the board of directors or trustees as the key organ for guiding the direction of the organization, ensuring its financial sustenance, overseeing staff, and taking ultimate responsibility for its performance and integrity. Moreover, as the chapters in part 1 explain, the central thrust over the past half century has been to model CSO governance on governance in the corporate business sector, emphasizing authority at the top (residing in the board), hierarchical control and top to bottom accountability. This trend has been reinforced by resource providers including government and institutional donors, as well as trustees drawn from the business sector, who demand accountability for their funding and require performance metrics to help them determine if the organization is accomplishing its mission.
Even in the business sector, however, the traditional corporate governance model has been severely challenged in recent years as failures in accountability have contributed to the collapse of major corporations in the midst of financial and economic crises and as information technology has made conventional forms of communication and control obsolete. Certainly for CSOs, the corporate model of governance was never a perfect fit. In particular, CSOs are in many ways more complex than business corporations, and not entirely amenable to top to bottom, metric-oriented control. CSOs have no overriding criterion analogous to profit with which to judge their performance. They have no owners analogous to stockholders in a business, but rather engage many different stakeholder groups, each with some legitimate claim to the guidance of the organization. Nor do they operate entirely in the marketplace, deriving their support from multiple sources ranging from charitable donations and volunteer efforts, to government subsidies and tax benefits, to fees and commercial revenues. All these factors complicate the issue of how they are best governed, and they help explain why the nature of nonprofit governance has always been contentious and complex.
The chapters in the first part of the book take us on a tour of evolving thought on CSO governance, beginning with chapter 1 by Donnelly-Cox. This author focuses on a key dynamic of the contemporary environments of CSOs – the blurring of boundaries between civil society, government and business. One consequence of this blurring has been the hybridization of CSOs themselves, taking on characteristics of organizations associated with other sectors, especially business. This in turn has important implications for CSO governance. For example, as business practices and market focus become more integral to CSO operations, governance is likely to reflect the corporate model more closely and favour the legal form of the foundation over the association form. Moreover, in the larger scheme of things, hybridization reflects new thinking about the role of CSOs in society as a whole – requiring a refocusing of internal governance to set new missions and programmatic directions. Finally, a changing role for CSOs is likely to be reflected in public policy, including changes in tax exemptions, requiring CSO governance to give new attention both to resource acquisition issues as well as to advocacy efforts aimed at influencing policy reformulation itself. As the author observes, these developments in hybridization will require CSO governance to maintain a tenuous balance between efficiency of operations and democratic decision-making.
Meyer’s and Maier’s analysis in chapter 2 acknowledges the growing dominance of the managerial, corporate model, but also describes parallel discourses in CSO governance that have long been a part of the overall debate and may indeed again become more prominent as CSOs attempt to address their contemporary and future challenges. These latter discourses – domestic, professionalist, grass roots and civic governance – are based on alternative institutional logics, and they capture various unique aspects of CSOs including voluntarism, cooperative culture, civic engagement, and professional service. The authors consider these discourses as they map out different possible scenarios of future CSO governance that integrate the alternative logics into the dominant corporate (managerialist) regime in different possible combinations over time.
The third chapter, by Chatelain-Ponroy, Eynaud and Sponem immediately challenges the historical pre-occupation with board governance by observing that in France, as in many other countries, governance of associations is shared in some manner between the board and the general assembly of organizational members from which the board is usually elected. The general assembly reflects the discourse of civic (democratic) governance considered by Meyer and Maier. Through their survey of French CSOs, Chatelain-Ponroy, Eynaud and Sponem find that governance is shared by the board and the assembly according to several different regimes. In particular, the authors identify three different styles of governance – emphasizing coercion, coaching or democratic decision-making – and six clusters of CSOs in which these styles dominate for the board or the assembly respectively. At the very least, studies of CSO governance such as this, which attend to the role of assemblies, contribute an important neglected piece to the contemporary literature on CSO governance. It also challenges conventional thinking that CSO governance is synonymous with board governance.
The chapter 4 by Ostrower and Stone recognizes that CSO governance is not exclusively about internal control of the organization but also the organization’s connection with its external environment. The “boundary spanning“ function of CSO governing boards has long been recognized in the literature but largely neglected in recent years. Now, however, in an era of horizontal relationships and decentralized and collaborative decision-making stimulated by the revolution in communications technology, the boundary spanning function of governing boards is increasingly critical. In fact, Ostrower and Stone find CSO environments to have become substantially more complex, dynamic and multi-faceted, with fuzzy boundaries and multiple intersecting components including economic (resource), public policy, legal and regulatory, community and normative elements. In this context, boundary spanning itself is multi-faceted, with boards serving as buffers, mediators, representatives, information gatherers, translators, and advocates for their organizations. Ostrower and Stone report on the results of two surveys of CSOs in the U.S., one broadly representative of the nonprofit sector and the other focusing on the particularly interesting case of nonprofit charter schools. The authors find considerable variation among CSOs in their emphasis on the different dimensions of boundary spanning and the accountability regimes they entail. Nonetheless, they identify a problematic general pattern of stronger focus on vertical accountability (e.g., to funders and regulators) and less on outward or horizontal accountability (e.g., to community and peer networks), raising critical questions for practice as well as research on how CSO governance is adapting to the changing environments in which CSOs are now immersed.
The first four chapters of part 1 focus primarily on the governance of individual CSOs in a changing environment. Chapter 5 by Koliba moves our attention to governance of key aspects of the environment itself by focusing on the governance networks in which CSOs are commonly and increasingly enmeshed, and indeed in which they are integral components. These cross-sector networks are primary means through which the boundary-spanning role of individual CSO governance is executed; moreover, the governance of the networks themselves is increasingly consequential in its own right. Koliba identifies five key types of governance networks – grants and contract networks, partnership networks, advocacy networks, intergovernmental networks and regulatory networks – and the different roles that CSOs play in these networks, respectively as – contracted agents or grantees; partners; peers; external interested parties; and third party regulators. He also examines how accountability is executed among organizational participants in these networks, through three alternative frames of reference – market, democratic and administrative. The result of Koliba’s review is a rich research agenda on network governance issues and the growing importance of networks to the governance of CSOs and the contributions of CSOs to the governance of the networks themselves.
In chapter 6, Borzaga and Depedri examine the particular case of social enterprises as studied in the European research tradition. Here, social enterprises are understood as private organisations engaged in on-going productive activity in the economic marketplace, thus relying on paid work while maintaining autonomy and permitting a degree of economic risk-taking. However, at the societal level, social enterprises are also seen to arise from groups of citizens with objectives of service dedicated to the community. As such, they are intended to ensure that decision making is not based primarily on returns to capital and the distribution of profits. Accordingly, Borzaga and Depedri focus on multi-stakeholder cooperatives that engage workers, users and volunteers as governing members. In particular, the involvement of workers in the ownership structure of the firm is seen to reduce the risk of opportunistic behaviours resulting from information asymmetries between management (the employer) and workers (agents) by combining these two roles. Borzaga and DePedri put this proposition to the test empirically by investigating Italian social cooperatives.

The final chapter in part 1, by Wijkstrom and Marta Reuter, makes the leap to societal governance by considering how CSOs can influence the nature of societal governance as a whole through their capacities to serve as exemplars of governance practice and through their normative powers to influence societal values. These authors view CSOs as sources of ideas and values that can ultimately shape the nature of societal governance by “…developing, defining and defending normative principles of governance…” For example, CSOs can lead the way on such issues as what it means to be a citizen, by establishing and demonstrating norms that embody the concept and values of citizenship. This chapter helps set the stage for part 2 which is primarily concerned with the broader issues of societal governance and its connections to civil society.
In summary, governance of CSOs is essentially inseparable from governance of the society in which CSOs operate. Addressing the problems of societal governance in order to enable society to cope with contemporary issues such as poverty and prosperity, disparities of wealth and income, environmental degradation and climate change, public health and social conflict, must start here. The problems of societal governance are of course much larger and broader than those of CSOs. But CSOs provide a special window through which principles and practices of governance may be understood, developed and disseminated into the wider arena of governance at the level of societies as a whole. The chapters of part 1 offer a modest and preliminary stepping stone into that broader arena.

Introduction to Part 2

The analysis in part one suggests that we need to enlarge our vision of CSO governance, and not focus exclusively on governing boards. Institutional and neo-institutional theory helps us to address these challenges, especially to understand how social enterprises deal with the involvement of stakeholders. However this conceptual framework does not tell us precisely how democracy engages with CSO governance. In particular, one major concern is the capacity of CSOs to govern themselves democratically while maintaining a collective identity necessary to contribute to the solution of social problems. An intent in the second part of this book is to explore new and fruitful approaches to CSO governance that address this question. Three avenues are specifically analysed.
The first avenue follows from the work of Ostrom. New forms of institutional and organizational arrangements emerge when a large number of stakeholders interact around the governance of collective goods. This proposition is relevant to CSOs because it posits the need to supersede the dualism of state and market. For Ostrom, there is a third way, based on the concept of the commons, to analyse how people can self-organize themselves, define their own rules, and act collectively in specific situations. This idea is very powerful because it can be applied broadly to the analysis of new frontiers of the contemporary economy including the informational commons, the phenomenon of planned obsolescence, and the shortening of supply chains based on local production. Chapter 9 and chapter 10 explore this first perspective.
The second avenue is about the pluralism of democracy, reflecting the work of Habermas. In contrast to representative democracy, Habermas argues for what he calls deliberative democracy. He reasons that the concept of the public sphere helps us to understand how a diverse community of equal individuals can deliberate rationally. This idea is very useful for understanding how CSOs can strengthen their legitimacy and bolster their democratic ethos by sharing their own issues with the public at large. Chapters 11 and12 address this theoretical perspective.
The third avenue rooted in the works of major theorists including Polanyi and Ramos suggest the importance of employing more comprehensive frames of reference. These include the para-economy, social management and a pluralistic approach to the economy that accounts not only for markets but also redistribution and reciprocity. This perspective, explored in chapters 13 and 14, is inter-cultural and based on experiences in different continents. Given these three ways of thinking about societal governance and the role and governance of civil society, part 2 of the book unfolds as follows:
Chapter 8 by Laville and Salmon serve as an overall introduction for part 2. The authors first examine the conceptual framework of Friedrich Hayek, characterizing it as the economization of the political sphere. They argue that this notion promotes a limited functional approach to understanding third sector organizations. Next, the authors explore the concept of the solidarity economy, which they define – in opposition to Hayek’s proposition – as the democratization of the economy. Here, the concept of governance has a completely different meaning. It opens questions about the goal of CSOs, the pluralism of democracy and pluralism of the economy. To demonstrate their points, Laville and Salmon reference the works of Ostrom, Habermas, Ramos and Polanyi. They conclude by calling for inter-disciplinary, critical studies of CSO governance, so that CSO governance research can benefit from a broader vision of the economy not limited to the market. They argue that this is a necessary condition for allowing the economy to eventually strengthen democracy.
Chapter 9 by Sievers highlights the deep ambiguity that characterizes the relationship of civil society to governance in the modern democratic polity. States’ failures to provide important collective goods, such as protection of the global environment, has drawn civil society ever closer towards filling government’s role. The assumption of this new role, however, has raised issues traditionally associated with the responsibilities of government, particularly questions of legitimacy and accountability. Sievers notes that Ostrom and others have demonstrated that civil society can address collective action problems through cultivation of norms of trust and openness of communication. Growing awareness by civil society organizations of the need to cooperate, increase transparency, develop mechanisms of self-accountability, and increase public access offer promise that civil society can indeed address some of the challenges of governance. In particular, Sievers shows in this chapter that network theory and design thinking can offer new paths for creating collaborative and constructive relationships among civil society organizations.
Chapter 10 by Nyssens and Petrella explores the responsibilities of public and private actors in the provision of local collective goods. These authors note that contracting out processes, tenders and public-private partnerships are increasingly common.. With this background, the chapter analyses a specific manifestation of CSO ownership – multi-stakeholder CSO ownership in the provision of quasi-collective goods. Quasi-collective goods differ from classical collective goods in the nature of their benefits for the community. They can be considered as multilateral externalities. As such, the involvement of a diverse collection of stakeholders in a CSO’s ownership structure can be a valuable asset. In particular, it can bring key resources to the organization including skills, networks, political influence and financial resources. The participation of stakeholders especially users, in the ownership structure is also seen as a way to build trust by reducing the risk of opportunistic behaviour in the provision of services in the presence of imperfect information. Through the conceptual framework of Ostrom, this chapter recognizes the multiplicity of governance forms that transcend the state-market dichotomy.
Chapter 11 by Enjolras, Steen-Johnsen investigates the potential for strengthening citizenship through newly emerging forms of governance. The authors point out two paradoxes: First, CSOs may have an impact on governance even when their internal governance is not democratic. Second, the role of CSOs in democratic governance is conditioned on the prevailing institutional governance regime. Drawing on these two paradoxes the authors assess the capability of different institutional governance models – in particular “corporative governance”, “network governance”, “and deliberative corporative governance” – to enhance citizenship and active participation, via three “models of democracy”: participatory, deliberative and competitive democracy. The essential contribution of this chapter is to show how different governance regimes presuppose different types of democracy and citizenship.
Chapter 12 by Hulgård explores three ways of conceptualizing the relationship between the state and civil society. The first approach emphasizes the role of volunteerism and the building of society one (civic) unit at a time from the bottom up. Within this ‘tradition’ civil society reflects family and community values as well as volunteerism. The second approach applies the concepts of social networks and social capital to examine the impact of micro-level interaction on individual mobility, urban cohesion and democratic performance. This approach is marked by a communitarian concern about the condition of civic engagement. The third approach stresses the historic relation between civil society organisations and government. Here, the author posits that CSOs should be equally recognized for their political dimension in matters of decision-making, and for their capacity for service provision delivered by volunteers and social entrepreneurs. As such, the author highlights the potential of an institutional-reciprocal model of the welfare state.
Chapter 13 by França-Filho and Boulossa notes the originality of Ramos’s work in reframing conventional organization theory. The authors explain how the idea of the para-economy is designed to implement the foundations of a political theory favouring a reallocation of resources and the establishment of relations among all social strata. In contrast to a market-oriented approach, this paradigm suggests a society that allows its members to take care of themselves according to their own criteria. Based on the phenomenon of social management in Brazil, the authors posit that governments and civil society actors can participate in the construction of public policies necessary to promote isonomy (equal rights) and fenonomie (environment conducive to creativity, autonomy, where the individual has a chance to act and not just behave passively), in order to promote a more sustainable world.
Chapter 14 is not a conventional book chapter. Rather, it is a collective and inter-cultural vision statement signed by researchers from Africa, Asia, Europe and Latin America (Eynaud, França-Filho, Ferrarini, Gaiger, Hillenkamp, Kitajima, Laville, Lemaître, Saadik, Veronese, Wanderley). Its purpose is to help point the way for future research that better accounts for cultural diversity worldwide. The authors note the difference between North American and European approaches to this issue. The latter, based largely on the work of EMES (the European Association for Social Enterprise Research), emphasizes the importance of participative governance. They claim a need to deepen the political dimension beyond participative governance. Going in such a direction, they argue about the need to examine carefully the realities (including the informal ones) from different continents. Then with this new impulse, the authors propose an ideal-type of social enterprise from a solidarity economy perspective. They based it on three dimensions – economic, social and political (already present in the previous work of EMES). On the economic side, the authors suggest hybridization of economic principles, and consistency of economic, social and environmental commitments. On the social side, they focus on indicators of transformation, social repair, democratic solidarity, and organizational autonomy. On the political side, they argue for publicness of mission service as intermediaries in public spaces, institutional entrepreneurship and political embeddeness. The authors suggest that this comprehensive framework can accommodate diverse cultural perspectives. This last chapter is just an exploratory example of how intercultural research can lead to new theoretical proposals.
Rather than propose particular propositions about civil society and societal governance, we offer this last chapter as a demonstration of the possibilities for intercultural exchange in research on the social economy. In particular, the chapter illustrates how researchers with different cultural perspectives and from different national contexts can draw on each other’s thinking to address some of the common issues of social enterprise. By extension, we argue in this book that such an approach can also enrich future research on governance and civil society. Until now, the debates have been largely confined to the U.S. and Europe. An expansion of such exchange through the integration of ideas of scholars from the rest of the world can only enhance the prospects for improving the governance of CSOs and the societies in which they are embedded – worldwide and over the long term.