Ownership and Mission Drift in Alternative Enterprises: The Case of a Social Banking Network

Abstract

Alternative enterprises – organizations that operate as a business while still also being driven by a social purpose – are sometimes owned by workers or other stakeholders, rather than shareholders. What role does ownership play in enabling alternative enterprises to prioritize substantively rational organizational values, like environmental sustainability and social equity, over instrumentally rational ones, like profit maximization? We situate this question at the intersection of research on: (1) stakeholder governance and mission drift in both hybrid and collectivist-democratic organizations; and (2) varieties of ownership of enterprise. Though these literatures suggest that ownership affects the ability of alternative enterprises to maintain their social missions, the precise nature of this relationship remains under-theorized. Using the case of a global, social, and environmental values-based banking network, we suggest that alternative ownership is likely a necessary, but not sufficient, condition to combat mission drift in enterprises that have a legal owner. A supermajority of this network’s banks deploy alternative ownership structures; those operating with these structures are disproportionately associated with social movements, which imprint their values onto the banks. We show how alternative ownership acts through specific mechanisms to sustain enterprises’ missions, and we also trace how many of these mechanisms are endogenous to alternative ownership models. Finally, we find that ownership models vary in how well they enable the expression and maintenance of these social values. A ladder of mission-sustaining ownership models exists, whereby the dominance of substantive, non-instrumental values over operations and investment becomes increasingly robust as one moves up the rungs from mission-driven investor ownership to special shareholder and member-ownership models.

Citation

Spicer, J. and Lee-Chuvala, C.R. (2021), "Ownership and Mission Drift in Alternative Enterprises: The Case of a Social Banking Network", Chen, K.K. and Chen, V.T. (Ed.) Organizational Imaginaries: Tempering Capitalism and Tending to Communities through Cooperatives and Collectivist Democracy (Research in the Sociology of Organizations, Vol. 72), Emerald Publishing Limited, Leeds, pp. 257-291. https://doi.org/10.1108/S0733-558X20210000072010