Ethics in Social Entrepreneurship 2017-12-17T13:41:35+00:00

Ethics in Social Entrepreneurship

Kidder (1995), states that if a situation is not a clear cut case of right vs. wrong then there are four ethical dilemma paradigms, truth vs. loyalty, short term vs. long term, justice vs. mercy, self vs. community.

The famous motto,“People, Planet, Profit”,(Elkington, 1997) includes the triple bottomline of making money, serving a constituency, and doing no harm to the planet.  But ethical leaders who display empathy are aware of a need for additional bottom lines that clarify the organization’s responsibility to its own employees, and its responsibility to the local and greater communities of which it is a part.

Social enterprises because of the difficulty of fulfilling multiple bottom lines (Ivanescu, et al., 2013) need leaders skilled both in ethical behavior and business practices who have the wisdom and adeptness to balance those bottom lines.  A survey carried out among 150 senior employees of social enterprises supported by the Schwab Foundation for Social Entrepreneurship found that social entrepreneurs in that organizational network were similar in their leadership style.  According to key team members, the great majority of the CEO’s of these social enterprises scored very high in ethical leadership, transformational leadership and empowering leadership (Heinecke et al., 2014, p.4).  The respondents also stated that if there was a leadership quality lacking it was primarily relating to the ability to employ transactional leadership linking performance to rewards and positive or negative feedback (Heinecke et al., 2014, p.4).  Those who took the survey reported the least desirable form to be autocratic leadership and it was least reported in the survey. Autocratic leaders were described as dominant leaders who don’t share power or decision-making and are indifferent to the values or opinions of others (Heinecke, et al., 2014, p.5).

However, aggressive leadership is not the only pitfall to be avoided in social enterprise management.  An equal hazard is a lack of transactional leadership with its important feedback and helpful direction.  This reinforces the need for the transcendental leader who can be both directive and empowering as the situation merits (Sanders, Hopkins, & Geroy, 2003).

The author’s own experience of working for a social enterprise, training and employing disabled workers, gave him an opportunity to confront some of these leadership issues and ethical dilemmas.  The organization had taken government loans to create and run a commercial laundry on its campus serving mainly federal government institutions under the Javits-Wagner-O’Day Act (Ability One, 2016).  It soon became evident that the developmentally disabled clients were not capable of operating the machinery in an efficient way that was profitable.  The CEO determined that this wasn’t a right vs. wrong situation but a right vs. right situation.  The truth was the laundry could not make money unless the company brought in more machinery and more adept workers to run it.  This in part overrode the loyaltycomponent that the organizational mission was to primarily serve those developmentally disabled workers.

The short term advantages of employing more severely disabled workers were overridden by the long term prospect of the operation creating too big a loss to be continued.  The justice vs. mercy issue was dealt with by finding other though lesser paying jobs for the more disabled workers.  The self vs. community issue was seen as the necessity to create as much profit for the organization as possible to enable its continued work to help all the clients and workers in its community.  The decision was seen within the organization as a case of difficult but ethical decision making.

Another example of this organization’s multiple bottom line thinking was the serious consideration of entering the field of environmentally friendly dry cleaning, using harmless liquid carbon dioxide instead of highly toxic perchloroethylene as part of its laundry business.  Since the market for CO2 dry cleaning was in its beginning stages and government had not banned perchloroethylene as had been anticipated, this opportunity was not followed up on. In this case the desire to serve the community was constrained by fears that the investment wasn’t justified by the market and that it could seriously injure the overall financial health of the organization.

AbilityOne. (2016). Javits-Wagner-O’Day Act. [Web page]. Retrieved from

Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Oxford, UK: Capstone Publishing Ltd., Oxford Centre for Innovation

Heinecke, H., Kloibhofer, M, & Krzeminska, A. (2014). Leadership in social enterprise: How to manage yourself and the team. Schwab Foundation for Social Entrepreneurship/World Economic Forum: Geneva

Ivănescu, I., Gheorghe, C.M., & Sztruten, G.G. (2013) Social entrepreneurship in EU region, Romanian Economic and Business Review,8(Sp1), 416-426

Kidder, R. (1995). How good people make tough choices. New York, NY: William Morrow & Co

Sanders, J. E., Hopkins, W. E., & Geroy, G. D. (2003). From transactional to transcendental: Toward an integrated theory of leadership. Journal of Leadership & Organizational Studies 9(4), 21-31