Institutionalizing social entrepreneurship in regulatory space: ...

Reporting and disclosure by community interest companies

an article by Alex Nicholls (Said Business School, University of Oxford) published in
Accounting, Organizations and Society Volume 35 Issue 4 (May 2010)

Abstract

In 2005, the British parliament passed legislation to make available the first new legal form of incorporation in over a century: the Community Interest Company (CIC). This initiative represented an important element within a larger set of public policy measures that aimed to create a more enabling environment for the accelerated growth of social entrepreneurship and, specifically, social enterprises. In an exploratory study, this paper presents an analysis of the regulatory space within which the reporting and disclosure practices for CICs were negotiated.
Three elements within the regulatory space are identified as having explanatory value:

• regulatory boundaries that set and limit the terms of negotiation around regulatory practice;
• the key actors that engage in a process of negotiation around the establishment of actual practice; and
• the range of debate and conflicting ideas that inform regulatory negotiation and legitimating consensus.

The analysis suggests that a normative logic of light touch regulation was of particular importance within the wider UK policy context from within which CICs emerged and that the CIC Regulator acts as a mediator of disclosure information across multiple user constituencies.

Empirically, this paper draws upon a sample of 80 published CIC annual reports to consider two aspects of CIC reporting:

• the quantity of information provided; and
• the type of data presented.

These data demonstrate the limitations and challenges of current CIC regulatory disclosure practices for key users of reporting information, particularly in terms of perceptions of organizational legitimacy. Conclusions are drawn concerning these limitations, particularly in terms of their implications for public policy.

In terms of new research, this paper makes two important contributions. First, it develops theory in terms of (social) reporting and public policy with respect to the regulatory mechanisms that relate the two. This has yet to be explored in social entrepreneurship research. Second, this paper includes a preliminary examination of the reporting practices of CICs in their policy context, including an analysis of a sample of the publicly available CIC annual reports that have been filed to date. This data set has yet to be the subject of any other academic research.

Hazel’s comment:

What is the difference between a CIC and a charity? I wasn’t at all sure since I know of several organisations that have been set up for the benefit of the community but have charitable status.

The CIC Regulator defines CICs thus:

Community Interest Companies (CICS) are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. This is achieved by a “community interest test” and “asset lock”, which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role.

So, we’re actually into a different animal here. A limited company that is not set up “purely” for private advantage but – here I start getting confused – a CIC is not, but apparently may be, a company limited by guarantee, a not-for-profit organisation or a charity.

Methinks that lots more study is required to help my colleagues at The Accounting Bureau (ABUK) provide an even better service to organisations that are not in the “any which way for a dime” camp. ABUK’s CEO specialises in the bookkeeping and reporting for such organisations but it would be good for me as the information manager to have more than a passing idea as to actually what all these different organisations are and what the rules are that make them different.

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