Agenda

1. Social enterprise and the companies of restricted profit distribution in Sweden31 May 2007, HelsinkiDr Karl Palmås Centre for Business in SocietyThe School of Business, Economics & LawGöteborg University

2. Agenda • Social enterprise in Sweden • The civil society tradition • Continental or Anglo-American approach? • Barriers to development • The Swedish limited dividend company • The privatisation debate • Legal structure • On the (as yet) modest establishment rates

3. Social enterprise in Sweden

4. The civil society tradition • Sweden has a long-standing tradition of an active civil society, institutionalised in the “people's movement” (folkrörelse) ethos. This is signified by... • a large number of associations, • originally connected to the worker, temperence, and religious movements, • with a focus on democratic governance, • large membership base, and • active membership.

6. Approaches to social enterprise:Continental or Anglo-American? • Social enterprises are a new way of labelling associations or co-operatives in “the social economy” (the Continental approach)‏ • Approach supported by existing civil society institutions and co-operative movement • Social enterprises are trading, social-purpose, preferably not-for-dividend, companies (the Anglo-American approach)‏ • Approach has yet to find institutional support

7. The “Swedishification”of social enterprise? • The Swedish institutional focus on the capital-labour nexus is yielding a local re-interpretation of the concept of social enterprise: • A cooperative that re-integrates long-term unemployed into the labour market, using a certain labour market initiative (lönebidrag) for funding the paying of wages. • In other words, social enterprise increasingly reduced to being solely a specific labour market policy measure, subsumed under the existing Swedish model • A move away from the idea of a radically transformed economy, featuring a pluralism of economic forms, located in the intersection of the three established sectors, active in several fields and industries.

8. Barriers to development of social enterprise in Sweden • Finance • No Community Development Finance Institutions (CDFIs);low level of venture philanthropy activity • Knowledge • Little research on social enterprise; social entrepreneurship not taught in universities • Recognition • Low (but rising) level of recognition of social enterprise from mainstream business, government, as well as wider society

9. The Swedish limited dividend company

10. The context: The Swedish privatisation debate • 80s: Emergence of privately-run public services in healthcare, schooling and childcare • Cityakuten, Pysslingen, Vårat Dagis • Cycles of establishment and repeal of laws intended to curb private, profit-distributing enterprises • Lex Pysslingen (-84/-92), Stopplagen (-01/-07) • Stopplagen and the limited dividend company • Right-wing-governed regions selling primary care public hospitals to private companies; social democrats prohibiting profit-distributing companies from providing publicly funded primary care • Establishment of new vehicle for delivering public services

11. The specs of the limited dividend company • The LDC is a normal joint stock company, but… • Owners can, at the most, claim dividends that are on the level of the overall interest rate • The company cannot be transformed into a traditional joint stock company • Can, under stopplagen, provide publicly funded healthcare • Critiques • Why complicate matters further by inventing yet other associational form? • The not-for-dividend status can be written into the statutes of a traditional joint stock company • Became available as a legal form on 1 January 2006

12. On the (as yet) modest establishment rate of LDCs • Number of entities established as LDCs: 6… • … of which some are municipally owned structures (ie. not the intended ”targets” for the LDC structure) • Potential reasons for the modest establishment rate • Many of the targeted public sector entrepreneurs have already set up shop, and find it cumbersome to switch associational form • The not-for-dividend criterion can be instituted in other ways • Stopplagen repealed by new government • Primary issue: No institutional or policy framework for supporting this new vehicle • The new legal form is ”naked” without due support

13. A comparison with the UK CIC • The UK Community Interest Company • Established in 2005, purportedly an inspiration for Swedish government • Results • Rapid establishment: 344 companies set up after one year (as compared to 1 company in Sweden) • CICs successfully delivering public services • Institutional embedding of new associational form • Futurebuilders; special regulator established • Incentives to meet the Community Interest test • High-profile support from government (cabinet office) • More advanced debate on the merits of new economic forms

14. Conclusions • As yet, the new legal form in Sweden is a failure. Nevertheless, this is primarily a failure of execution: There is a need for this kind of associational form. • Proper institutional and policy support – as well as clever marketing – can turn this failure into a long-term success. • In order to get to achieve this, the Swedish debate on public services has to move towards an advanced (as well as more pragmatic) discussion on the merits of new – and the obsolescence of old – economic forms.