Limiting financial return to ROI to protect social emphasis

(Original article published by Axiom news in August 2010 a year before Terry Hallman's death) 

Limiting the financial return of a social business to return on investment (ROI) can help balance the company’s blended focus on profit and mission, says Terry Hallman, CEO of a U.K.-based social business addressing poverty relief and reformed childcare in the former Soviet Union.

Considering that businesses that issue no shares and therefore distribute no dividends may still offer a financial return, Hallman says he sees ROI as the preferred form of non-dividend financial distribution.

“When we get into divvying up financial profits it’s too easy to get sidetracked by a myriad of possibilities along those lines,” Hallman tells Axiom News.

“In that case there is distraction from the primary objective of any given project, the social concerns for people at risk of exclusion, or already excluded, from the opportunity to have a decent, safe, secure life.”

Hallman adds that if “a lot of emphasis is placed on financial returns, the usual suspects can and will get in, figure out to how strip out the social aspects of social businesses and keep all profits to themselves.”

“Think of the corporate raiders on the loose in the U.S. in the 1980s. Same thing. That mindset is the driving force that has created such need for social businesses to begin with.”

People-Centered Economic Development (P-CED), which is based on the U.K. community interest company (CIC) structure, issues no shares and has no dividends to distribute, yet does have the option of setting up various for-profit ventures and offering investors a percentage of financial ROI, according to Hallman.

For instance, if financial investment produces 10 per cent ROI, the investor can contract to receive half of that, yielding five per cent ROI. The social business uses the other half, leaving the principal amount untouched. Ten million dollars at 10 per cent ROI per year yields $500K to the investor and $500K for social business operations.

Hallman is currently investigating the setup of a multi-million dollar fund offering split financial ROI if needed, that is, a portion to investor(s) and the remainder to P-CED.

The funds will be directed to concluding a project in the Ukraine which involves funding the training of residents to develop social businesses. Included in this work is supporting children who have disabilities, many of whom have been left to die in secretive locations. P-CED is helping to move these children to safety and give them access to modern healthcare.

Notes:

In 1996 with an invitation to serve on the Committee to Re-Elect the President, Terry Hallman delivered his white paper on an alternative to capitalism to President Clinton.  :

https://p-ced.com/1/node/60

In 2004 the Community Funding Enterprise which had first been deployed to source the Tomsk Regional Initiative became an operational model in the UK and distrbuted a business plan to tackle poverty:

https://p-ced.com/1/node/30

The 2006 article 'Death Camps for Children' broke the silence over the treatment of disabled childen in Ukraine's institutions.  

http://eng.maidanua.org/node/581

The strategy plan for microeconomic development and social enterprise in Ukraine entered government channels in October 2006, soon after this Skoll conversation on 'Profit For a Purpose' 

In December 2006, joining and seeking support from the UK Social Enterprise Coalition we were told that our work was beyond their current focus 

http://economics4humanity.wordpress.com/2012/09/24/welcome-to-social-enterprise-support/

After the recommendation to create 400+ rehab centres was announced as governmment policy the stratefgy plan was published online in two magazine articles to protect the IP of the social mission. part one described childcare reform, while part two described the proposed centre for social enterprise development at Kharkiv National University and the national social investment fund.

http://en.for-ua.com/analytics/2007/08/06/121201.html

http://en.for-ua.com/analytics/2007/08/09/110003.html

The paper had called for US support and In February 2008, a follow up call was made to USAID and the Council on Foreign Relations

https://p-ced.com/1/node/37

Later in 2008, the plan was introduced to the EU as an entry in the EU Citizens Consultation.

http://economics4humanity.wordpress.com/2012/07/03/the-eu-citizens-consultation-2008/

In 2010 it was introduced to Grameen Creative Labs and  Erste Bank who were soliciting ideas in the 2010 Social Business Tour.  

http://economics4humanity.wordpress.com/2012/09/03/a-conversation-with-grameen-partner-erste-bank/

With the announcement of a social enterprise development initiative by USAID and the British Council, Terry Hallman submits an application introducng P-CED's work since 2004 in Ukraine as a self-supporting social business.

https://app.box.com/s/qve8n6w1pb9psmiqztrk

In 2011 my MIX article on Changing Capitalism for People and Planet was originally written for the Guardian Social Enterprise Hub on the suggestion that I submit something as the basis for an article. It did not match their editorial style, I was told:

http://www.managementexchange.com/story/changing-capitalism-people-and-planet 

Terry Hallman's death was discovered by activists from Maidan who wrote of his impact including extracts from the letter to USAID in 2008.

Whether these kids live or die is of little, if any, concern to mafia.   

In my article 'Every Child Deserves a Loving Family' you may read the argument for investment in creation of family type homes for all institutionalised children, to reduce the financial burden on the state:

http://www.managementexchange.com/hack/every-child-deserves-loving-family 

In Manchester UK, last year, a pilot scheme to apply social investment in a strategy almost identical to that proposed in the 2006 'Marshall Plan', albeit with a profit making social intermediary:  

http://www.cypnow.co.uk/cyp/news/1072502/manchester-green-light-social-impact-bond-scheme