PUBLIC INTEREST COMPANIES IN NEPAL: A POTENTIAL GAME CHANGER

I just read an article on the International New York Times about the decision of the founders of Kickstarter, one most famous crowdfunding web sites, to strengthen its social mission by re-incorporating in a way that the company’s social mission will be strengthened. The beginning of a revolution?

An increasing number of American companies are following through on the example of the United Kingdom, the country that pioneered the concept of conscious for profit companies by creating a new category of companies, the so called public interest companies, hybrid entities that while being on the market and therefore profitable, are  run with a strong social mission.

By turning themselves into public benefit companies, the local version of the public interest company, Americans entrepreneurs are making a clear call for a different way of doing capitalism.

Be clear that the founders of Kickstarter are not turning the company into a charity nor will they stop being accountable to their investors who will continue to receive their due shares of profits on a regular basis.

Yet as a public benefit company, Kickstarter will  embrace much higher standards in terms of accountability and transparency with the decision making process being transformed by making it more inclusive and participatory.

The on line resource center http://benefitcorp.net/ clearly stated how public benefit corporations distinguish themselves from other companies by “having a corporate purpose to create a material positive impact on society and the environment; 2) are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment”.

The creation of this new class of corporations, rapidly expanding all over the world, has the potential to radically change the economic landscapes, potentially rewriting the foundations of the global economy.

These companies can offer real answers to all criticisms thrown against globalization: from being wild, dry, cynical and ego driven, capital markets all over can fully endorse a new way of doing business while continuing to make money.

While the rising social entrepreneurship sector that is becoming stronger and stronger even in developing countries, is the perfect match for these forms of corporations, the opportunity here is also for the “old” so called third sector.

Think about the so called “social economy”, all the service companies established with a clear mission to improve society: from managing hostels for homeless people to running day care centers for the elderly, millions of dollars are produced by these entities in the market of social care.

In continental Europe many of these entities are registered as social cooperatives and contribute tremendously  in the creation of public good on daily basis.

Ironically, it is probably only in Nepal that, when you think about cooperatives, you think about for profit financial institutions (or savings and loan cooperatives in rural areas) and you know that they are not at all “social” or community focused.

(On a positive note Rastra Bank officers are trying to clean up the dirt. We wish them well in this attempt. Certainly the public will greatly benefit).

This is truly an unfortunate exception, as all over the world, cooperatives are the hallmark of this hybrid form of doing business.

All the non state entities run for profit organisations but with a strong social mission representing the core of the so called public or benefit companies.

Interestingly Nepal has also its own version of public interest companies as per the Company Act. Unfortunately its potential is vastly underutilized.

After all how many people really know about this form of corporation existing in the country?

The fact that there are still uncertainties regarding how these companies can operate in the economy does not help.

It is interesting that in  western countries more and more charities or not for profit organisations are also embracing these new forms of incorporation directly or by setting up their own public interest companies.

Until Nepal and other developing countries are no longer donors dependent, this transformation will not see any real breakthrough. You might have legislation in place but not any “pull” factors to attract innovators within the not for profit sector (people called it NGO/INGO sector….).

Still the potential is vast with many NGOs running programs also being potentially viable from an economic point of view.

But there is hope for the future: you can continue be donors’ dependent but also be smarter about how you work with donors .

Why not lobby the government for investing in these public interest companies through a robust regulation? Some donor agencies like ADB stopped providing grants to Nepal because of its stronger economic performance.

Why then shouldn’t we establish a financial facility with some donors’ money to invest in companies driven by profits and also by their social mission?

Prosperity can be created in a different way: not rejecting entirely the cardinal points of capitalism but by reforming them. This will make Nepal economically stronger and more self-reliant.