Colin Mayer, the Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford, was the keynote speaker at this year’s Charity Bank Impact Awards & Open Evening on 3rd June at The Mercers’ Hall in London
Addressing the audience, Professor Mayer, said: “You are part of a major movement that is in progress. There is a transformation that is sweeping across both our charitable and corporate sectors: the recognition that the two are intricately interrelated and intimately depend on the success of each other.
“That has been the case for some time in certain areas such as social entrepreneurship and I have observed first hand in the Skoll World Forum that the Said Business School in Oxford hosts a global movement that is sweeping across entrepreneurship. But it is much more than that.
“First there is a realization that corporations are failing us – failing to uphold our trust, our environment and our societies. They are failing us because of their single-minded pursuit of financial gain for the benefit of their executives and shareholders – gains that often come at the expense of us as customers, communities, and children.
“Second, there is a realization that the charitable sector falls short of our expectations and aspirations for transformational change. This is sometimes discussed in the context of the inability of social entrepreneurship to “scale-up” to levels where they can have the impact that the world needs.
“Common to both these problems is finance: the ability of companies to pursue goals that go beyond the financial interests of their shareholders and the ability of charities to raise the resources and funds that they require to deliver on the required scale.
“That is where we are just beginning to see the transformation take place. The corporate sector is appreciating that its single-minded pursuit of financial gain is not sustainable – in both an environmental sense of the exploitation of our natural capital and also in a social sense of the public acceptability of their conduct. From the early days of the empty rhetoric of corporate social responsibility we are now moving to the next phase of the identification of credible commitments to uphold corporate purpose.
“At the same time the charitable sector is appreciating the need to become more commercially oriented and adopt the professional practices of the corporate world. While corporations have had strong management capabilities, they have lacked clearly defined purposes; and while charities have had visionary purposes, they have lacked the managerial capabilities. Bring the two together, through giving corporations a purpose that extends beyond financial returns and charities access to the managerial capabilities of corporations, and the power for transformational change becomes immense.
“That is what is just beginning to happen with some radical innovations:
- public benefit corporations which are sweeping across the US with purposes that go beyond commercial objectives, where the executive have a fiduciary responsibility to uphold the public purpose
- industrial foundations which not only are charitable foundations but also own some of the most successful corporations in the world such as Bertelsmann, Carlsberg, Ikea, Tata and Velux
- engaged long-term investments by Swedish pension funds in companies that emphasize environmental, social and governance factors
“The Charity Bank is a very good example of this. First, regulation forced the Charity Bank to drop its charitable status and convert its preference shares into ordinary shares. That raised the issue of whether a charity could operate as a regular company. What it did was (a) enshrine its charitable purpose in its articles of association and (b) introduce a ‘mission lock’ by which 90% of its shareholders would have to agree to a change in its articles, thereby effectively ensuring that it can continue to perform its charitable functions indefinitely.
“Second, it has to be a commercially viable bank that at least covers the cost of the capital it raises. To do that it firstly has to raise funds on more advantageous terms than regular banks and secondly, it has to ensure that its borrowers are credit worthy and capable of servicing their loans. That involves it not only in the provision of loans on favourable terms but also assurance that its borrowers have professional management and governance systems in place. It can therefore assist in the process of change in the charities sector to more commercial operations.
“The Charity Bank therefore exemplifies how a regular commercial organization can lock in a charitable purpose as part of its core mission alongside its commercial needs and how it in turn is encouraging the charitable sector to adopt more commercial practices. “We have a long way to go before we can say that the corporate sector is truly enlightened in adopting purposes and practices that benefit us as customers and communities or that the charitable sector is really sufficiently commercial to scale up to the levels that society needs. But the Charity Bank illustrates both what is needed and what can be achieved.”
“You are part of a major movement that is in progress. There is a transformation that is sweeping across both our charitable and corporate sectors: the recognition that the two are intricately interrelated and depend on the success of each other."
- Colin Mayer, Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford.