What do social enterprise and chocolate have in common?


The failure of the school bus to turn up this morning and consequent need to drive my youngest in to school gave me the unexpected pleasure of a few minutes after 9 listening to Radio 4 - and hearing Deborah Cadbury talking about her latest book The Chocolate Wars.

In this discussion, in this particular history, there was much to learn about social enterprise.

Many know that the great names in English chocolate – Frys, Terrys, Cadburys and Rowntrees - were Quakers.  George Cadbury once worked for John Rowntree!  And many people in social enterprise know that Quakers have been crucial to its history too – Scott Bader for example.   But few are aware either of the extent of Quaker enterprise or the extent to which it was driven by Quaker / social enterprise principles: that wealth creation should fund social benefits, that fair trade is essential, that reckless debt is destructive.

These were the principles that once drove the growth of such household Quaker names as Barclays and Lloyds in banking, Clarks shoes, Wedgwood pottery, Bryant & May, Huntley & Palmer – not to mention Sony and Oxfam!

When the Cadbury brothers Richard and George found that the little chocolate drink business they inherited from their father in Birmingham in 1861 was losing money, they used up their inheritances to keep the company afloat - 'they survived on bread and butter suppers' – yet still provided excursions, education, clubs and improved wages for their employees.

Eventually, as we know, the business prospered – until last year it was infamously taken over by the huge multinational Kraft.

Deborah Cadbury makes the point that this change reflected a wider change in the ownership structures of capitalism – that Cadbury shares had insidiously passed into the hands of city hedge and pension fund managers only really interested in quick financial gains.

So the parable is of a 186 year old business built on altruism, via the amorality of modern financial markets, swallowed up by the globalised corporate world.

For me there were two important lessons for social enterprise in this history: first, that we are not so different from ethical businesses of other times and traditions, which far from being marginal have often been pre-eminently successful; and secondly, that we need to consciously position ourselves not apart from business at its best - indeed we ARE business at its best - but away from city/global business models and methods based on greed and exploitation - perhaps by more consciously aligning ourselves with the anti-globalisation movement - localism, environmentalism, communities and fair trade - if, that is, we are to avoid similar fates to Cadbury and Rowntree.

Update: And now they don't

Social Enterprise ... Quakers

So glad to see that ScottBader is now at last getting some wider recognition... ...next year we have our 60th Anniversary ... about time we are noted ! ! ! ... AND that we are international now and a "Members Assembly " is now the International Democratic Body representing the normal functions of the AGM of normal shareholders... except that shareholders are all in the workforce & are 80% members of a charity called the ScottBader Commonwealth Ltd that holds the shares of the operating Company SB Co. Ltd FOR A SOCIAL PURPOSE... i.e. the demonstration of a truly ethical co.
See Dr Marco Guidi's paper in Elsevier now stating that SB & the JLP have less "Moral Debt " than other co's... especially public ones!

I listened to the web link

I listened to the web link radio broadcast, at the end of Deborah's talk she was interrupted, or redirected in her remarks about why they failed. Which given my circumstances would have been fascinating to hear. I suppose I need to read her book.
Surely the model must have broken down because the founder members or their descendants passed on their shares to less altruistic shareholders. This is an assumption, have you any real reasons?

Well they didn't exactly

Well they didn't exactly fail - Joseph Rowntree in particular was crucial to the development of the modern welfare state and the European model of relatively social capitalism - and of course the businesses largely survive and are financially successful in some form.
I assume there were 3 mechanisms at play:
1. Dilution - via inheritance, the need to raise more capital, and probably for other reasons too, shares passed to a larger, less involved and less committed group
2. Part of the reason for Quaker engagement in enterprise was social exclusion - they were barred on religious grounds from other middle-class careers such as the church, army, professions - but as this discrimination decreased - and in combination with the dilution of shareholdings - the focus on doing business to do good lessened
3. Most important though, I'm inclined to think, is the change from individual shareholders to institutions. Deborah Cadbury said I think that immediately before the sale to Kraft about a third of Cadbury shares were owned just by hedge funds. Individuals probably would have defended Cadburys etc from takeover, and in my experience are more concerned with social impact too - but most shares are now held by funds of various kinds managed in effect by individuals who are part of the city financial centre world - ownership and power has been re-concentrated into the hands of a few proxies - who in 'maximising shareholder value' are 'just doing their job', and who probably really believe that this narrow financial focus is what drives competition and 'growth'.