Axis 2: The social value of financial cooperatives
Leader of axis 2: Philippe Eynaud (IAE de Paris)
The financial cooperatives present specific models of governance and objectives that will determine their relationship with their territory. The research aims to understand and identify the mechanism that links financial cooperatives' activity and the creation of social value. Additionally, the research investigates the methods for the evaluation and the measure of the social value in order to appraise the issues related to financial cooperatives' performance.
Project 1 - Performance and social value creation
Philippe Eynaud (IAE de Paris) / Damien Mourey (IAE de Paris)
Double performance, quantitative production and “strategic decoupling”
Compared to the dominant financial sector, the cooperative banks are developing a specific model characterised by a strong local anchorage, a client base mostly of medium and small local companies, and a choice for social responsible funding.
In this context, a certain kind of evaluation open to the concept of social value creation becomes relevant. Beyond a rigid monetary evaluation of the funding activity (risk and profitability), other dimensions of performance, notably the long term social value created through cooperative banking activity at the local level, must be taken into account.
The complexity of this rationale implies taking into account a large number of factors and understanding the dynamics of development at the local level.
The general values represented by the cooperative banks as well as the search for a double creation of social and economic value will set the analytical framework for their performance evaluation. More specifically, the issue is not to oppose one to the other but to understand how the cooperative banks’ long term activity at a local level will enable the delivery of both. However the measure and the evaluation of the double economic and social performance are far from easy tasks as it is underpinned by the exsisting works on the topic.
The cooperative banks, through their decisions and implementation of the funding activity, can be considered as main actors within the broader cooperation chain enabling the maintenance and the development of the economic activity in a territory. The measure of the long-term social economic impact of their activity at a local level will be the focus of our research.
The research papers have proposed numerous reporting and evaluation methods to take into account the social value created by the organisations: the Social Return on Investment (SRI), the Global Reporting Initiative (GRI), the blended value accounting are just some examples of the new approach of the measure of performance.
More particularly, the social companies embedded into the social entrepreneurial movement are at the front line in this field and strongly committed to the measure of social impact. They show a great ability in the use of accounting and reporting methods. They combine them in an innovative way in order to produce quantitative representations of their double financial and social performance (Nicholls, 2009).
These papers also show the social enterprises’ great freedom in defining what and how to measure, and how to communicate it.
The current absence of a process for the standardisation and the audit of the social impact measure (Armstrong, 2006) partly explains the important degree of discretion benefitting the actors of the evaluation process. Some additional difficulties are specific to the ESS sector: the research of global indexes (including social objectives, impacts on society, common benefits, and so on..) is difficult (Forbes, 1998) and requires some arbitrage. Also the stakeholders’ variety - administrators, public and private funders, volunteers, managers, employees, foundations, users, general public – and their absence of hierarchy as a basic condition, imply a diversity of opinions about the objectives addressed and their prioritization making the measure a sensitive task.
Behind the various actors there is a multiplicity of interests and issues concerning the production of figures and the representation of the social impact. Some researchers have underpinned the possible risk of an important “decoupling” associated with the ongoing process for the measure of social impact (Arvidson & Lyon, 2013).
The “decoupling” concept relates to a new institutional vision of the management tools – here the social impact: this new vision considers that the external environment exerts pressure on the organisations forcing them to comply in order to survive (Meyer and Rowan, 1977; Di Maggio and Powell, 1983).
However, the technical or economic dimensions of the environment, combined with the constraint of efficiency that they imply, are not the main force the organisations must adapt to; it is much more the cultural and symbolic dimensions of the environment that impose a constraint of legitimacy.
The organisations need to comply with a standard by adopting the rules and the rational procedures that partly set their formal structure. In the research field of accountancy , it has been argued that the “decoupling” can surely be possible but at a lower level due to the existence of accounting standards and legal issues related to the accounting information output (Carruthers, 1995).
In the framework of social impact measures, on the contrary some authors underpin that the eventual “decoupling” level is higher concerning general accounting. The reasons are: the absence of an accounting standardisation process, the impossibility of comparing the different social impact measures (specific to each social enterprise), and the information asymmetry between the funders and the social enterprise’s actors.
The ESS organisations are submitted to increasing pressures from their institutional environment to bring evidence of their social impact, measuring and evaluating their performance. However the answers provided by the ESS organisations concerning the accounting requirements are quite different (Arvidson & Lyon, 2013). These authors list three different answers to the social impact measure question: compliance, resistance, and promotion.
Compliance implies the acceptance and integration of the new standards imposed by institutional actors such as funders or public authorities. Resistance means the opposition to this compliance in the end. This can surely be possible when the organisation is financially independent and/ or controls the necessary means to implement its project. The third answer is more subtle since it shows first a resistance in complying with the demand of social impact measures then its acceptance. However this forced acceptance can evolve toward a real acceptance when the organisation’s actors become aware of the flexibility that can be applied to the social impact measure process. The authors talk about “strategic decoupling” when the figures are used in a symbolic way on a voluntary basis as elements to legitimise the activity (Arvidson & Lyon, 2013).
From this point of view, the social impact measure is a means to stand out from competition by other organisations to obtain new funding. In fact this doesn’t exclude the social impact measure also to be applied for internal use in order to enable a collective reflection about a joint common action enhancing the development of the operational performance.
The objectives of the research
In order to justify the specific of their development model, the cooperatives banks may also commit themselves into an evaluation process of their socio-economic impact. How can this evaluation process be understood within the cooperatives banking system? The objective of the research is to test existing evaluation models for the social value creation, and to analyse their relevancy in specific fields. The methodology applied is that of the case analysis with a qualitative approach. These objectives are based upon ten or so case studies taking place in companies funded by cooperative banks.
The expected deliverables
Works produced in the framework of this research project will be presented during peer –reviewed conferences. Particularly we plan a presentation to the Egos international conference and to the Aims French conference. The final papers will be proposed for publication in academic reviews. Some of them are related to the topic. A few may be interested in this research topic:
- Business Ethics: a european review
- Business and Society
- Journal of Small Business and Enterprise Development
- Nonprofit Quaterly
Project 2 - Comparative analysis of the social efficiency of cooperative banking
Porteur : Leire San Jose (Université de Bilbao) / Jose Luis Retolaza (Deusto)
The legal forms of financial institutions (commercial banks, savings banks and cooperative banks) present three different forms of ownership; a priori it implicates different strategies, governance and also results and performance. It is a challenge to establish not only how to define the social and economic banking efficiency, but also if these efficiencies are different according to the typology of financial institutions.
An exploratory descriptive analysis is necessary, in relation to all financial institutions in the European Union (EU-15). It will show the differentiation of the banking typologies (commercial, savings and cooperative banks) in relation to a specific country; the banking size will be monitored too.
As we face a serious gap in the existing literature, reinforced by the interest of the society in this topic, the following research questions will be answered:
- Firstly: Does the legal form affect the economic and/or social efficiency of financial institutions? discretion management will be analysed in this section.
- Secondly; what type of banking carries out the best social and/or economic efficiency?
- Thirdly; is the relationship between social and economic efficiency divergent or convergent?
Aiming to answer to these research questions, we will use the Bankscope (Bureau Van Dijk) database using the data envelopment analysis for developing the efficiency of banks; also a Factorial Analysis of Variance will be applied, including the legal form as moderator variable, and country and size as control variables.
The usefulness of the research results is focused on four complementary lines:
- Contribution to the scientific theoretical framework, because the project results fill the gap about two scientific problems; the first one in relation with the stakeholder theory, the Jensen governance problem; and the second one in relation with the social-cost paradox. This analysis will allow the refuting, or possibly the strengthening of these two scientific questions, and it will open the window to establish new banking strategies and governance.
- Contribution to public policy, because the project results can provide a guidance on the selection of the optimal model in relation to the expected result (based on the efficiency of companies but not only the economical one focused on shareholders, but also the social one in which all stakeholders are taken into consideration); this will involve public intervention in favour or against a particular business model.
- Contribution to the banking management analysis, possibly because during the analysis process shortcomings in existing indicators related to social value will be identified; this will lead to proposals for the introduction of new social indicators enabling a more efficient analysis; the social accounting, in terms of social sphere results established by financial institutions.
- Construction of a social accounting, the results outcome implicates some improvements not only in the analysis but also in the process; more precisely it will probably show the increasing interest of businesses, society and politics in developing a systematic information and analysis process based on the social value generated by the organizations.
The results will be disseminated not only in working papers, but also in various publications. Moreover, the work in progress will be evaluated in different national and international conferences. The results will be reviewed by cooperative , commercial and saving bank professionals to include their feedback and integrate the most important results in their strategy processes and in their banks´ governance with the aim to fill the gap about social efficiency; such an important topic in the current context.
Thesis - Work in progress: Mariam Konate
L’approche de la valeur sociale dans les coopératives financières
Sous la direction de :
Philippe Eynaud et Damien Mourey
- L’objet de notre thèse est d’approcher la création de valeur sociale par les coopératives financières.
- Nous cherchons à comprendre comment les coopératives financières qui s’identifient comme étant créatrices de valeur sociale mesurent cette valeur créée ? Avec quels outils ? Ces outils sont-ils extensibles/ applicables à d’autres coopératives financières ? Si la valeur sociale existe et qu’elle est mesurée, comment est-elle appréhendée au niveau d’un territoire ?
- La finalité de notre thèse est de pouvoir mieux connaitre l’environnement des coopératives financières françaises et de mieux approcher les mécanismes de création de valeur sociale qu’elles génèrent grâce à leurs activités.
- Nos travaux permettront d’approcher les synergies en termes de création de valeur sociale entre les coopératives financières et des acteurs locaux. Ainsi, après avoir repéré des acteurs locaux sur les territoires, nous chercherons à voir dans quelle mesure une évaluation partagée de la création de valeur sociale peut être envisagée autour (et à partir) des projets financés par les coopératives