Common Sense Comes to Town!

Common sense is the most fairly distributed thing in the world, for each one thinks he is so well-endowed with it that even those who are hardest to satisfy in all other matters are not in the habit of desiring more of it than they already have. (Descartes)

Community (re)investment

Posted on | August 14, 2010 | No Comments

We have become, in Quebec, quite dependent upon our government to manage an array of social issues (from energy distribution to healthcare, welfare and even daycare). However, some see public management as heavy inefficient and costly.

On the other hand, the private sector is often blamed for making profits at customers’ expense, thinking about shareholders’ interest more than stakeholders’, which is not compatible with social responsibility. The PPP model briefly put forward by the Liberal government was quickly shot down in flames by critics left, right and center. But a hybrid model has been created recently in the UK, and the USA just followed suit

It consists in a new type of company, the PIC (Public Interest Company) in the UK, and L3C (Low-Profit Limited Liability Company) in the US. It bestows characteristics that stem from both the private company and the non-profit organisation.

Both governments have put in place limitations to these new companies: they fill a social need, they cannot get entangled in politics, and they must be answerable to their community, etc. On the flipside, they enjoy various fiscal advantages according to the laws of each country.

Typically, these societies exist as Limited Liability Partnerships, which means that one or more partners, while they inject fund, have a status of limited legal liability (i.e. they cannot be sued for mismanagement) if they refrain from managing the company’s activities. Management is thus left to a board of directors picked from the company’s stakeholders (employees, customers, members of the involved community). However, the company has to remain solvent, and can make some profit to ensure its prolonged existence.

This is far from a perfect organization (it can be subject to influence peddling, and can face dire financial risks if not profitable enough). However, it could bring new freshness in some social sectors as it must tender to customers (who sit on the BoD), maximize efficiency (since partners can be rewarded with a part of the profits, although severe restrictions are in order) and even offer competitive human resources management.

It would definitely be worthwhile examining this in depth, making sure that this model fits in with Quebec’s and Canada’s business world and tax system.

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