Jul
30
Is there a right and wrong in Company structure?
July 30, 2009 |
I spent this morning at the workshop of the Bangladesh Social Enterprise project (BSEP) arranged by the Bangladesh Enterprise Initiative (BEI) and financed by DFID. Dr Rehman Sobhan, Chairman of the Centre for Policy Dialogue (CPD) described in detail the Grameen and Brac models of social business and largely compared the company structures.
Grameen Bank is a profit making business providing microcredit loans throughout Bangladesh where, until 2006 all profits were reinvested back into growth and expansion. The borrowers own 95% of equity and ten selected borrowers have a seat at the board meetings. Despite their regular annual requests for lower interest rates the management always had the final say and only from 2006 was a dividend paid.
In the Brac model, the borrowers / clients / suppliers of the various businesses have no stake in the company. In the case of Brac dairy, the company collects the milk from the poor dairy farmers, processes it and takes it to market. The farmer is merely a supplier. Comparing this to Amul in India where the farmers have a stake in the company as a co-operative.
My question: what is the value of an equity shake in a company in which you effectively have no say and for the most part, no dividend? Is there a value to having a tiny share in a company which gives you no rights or benefits? It seems to me, that despite the different company structure there is no effective difference between the two models.
If the philosophy of the business is to benefit either those poor borrowers or the poor dairy farmers then surely the price you are paid for your milk or the interest rate on your loan is far more important to you than a stake in a company where you have no say.
Is it not by actions, ie. better price for milk, or lower interest rate, that we might determine the social nature of the business rather than the company structure?
Samantha
Comments
2 Comments so far
About us
RSS Feed
Subscribe here
If you’re having problems subscribing, try updating your web browser (you need to have IE7 or similar) or click here to download a free news aggregator
you are right that there is no benefit for poor people to be part of a committee where you cant speak or benefit financially.
This is a question that I have been grappling with myself lately. I would like to help the community in the area where I will be developing Panigram Resort prosper, and I have several ideas of businesses that could be started in the area that could cater to the burgeoning tourist industry.
On the one hand, as an entrepreneur myself I value ownership and the share of the profits that (normally!) brings. On the other hand, I am not sure that the villagers in my area would be able to execute those business ideas on their own. I think they would really benefit from some management. So do I partner with them to create new businesses or do I create the businesses myself and then pay them fair wages? Maybe a hybrid like in the U.S. where employees could get share bonuses for good performance or a certain number of years of service??
I welcome input!