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Social Enterprise Mark considers libel action against members of its former parent

Social Enterprise Mark considers libel action against members of its former parent
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Social Enterprise Mark considers libel action against members of its former parent13

Finance | Vibeka Mair | 10 Feb 2012

The Social Enterprise Mark (SEM) Company has sought legal advice about how to handle members of Rise who have publicly objected to plans to dissolve the organisation and transfer its assets to SEM.

Lucy Findlay, managing director of SEM, told civilsociety.co.uk that the Rise members have presented an inaccurate picture on the internet and in other public places in a way that could damage the company and reputation of individuals.

“We have taken legal advice on this and are considering further action in terms of libel," she said.

Last year, it was announced that Rise, a development body for social enterprises in the South West of England, would be dissolved, and a legacy trust formed with its assets transferred to SEM, which was created as a subsidiary of Rise two years ago.

The proposal was put to the Rise membership at a general meeting, with the required majority (75 per cent) agreeing to close the company. However, a decision regarding the redistribution of assets to SEM only received a 70 per cent majority, less than the 75 per cent required for the special resolution.

Rise obtained legal advice and asked the whole membership to suggest other resolutions as to what should happen to the assets of Rise.

Findlay said two other proposals were put forward, one to delay and hold another meeting, and the other for the assets to go to a “democratically controlled fund to provide support to social enterprises”.

She said that these two proposals, and the proposal to transfer Rise’s assets to SEM, were put to a postal vote. The required majority (76 per cent) voted in favour of transferring assets to SEM and setting up a new legacy trust to hold the shareholding. A total of ten members (12 per cent of those voting) voted for either of the other two resolutions.

However, three members who object to the plans have told civilsociety.co.uk that they believe the process has not been carried out fairly or correctly.

MJ Ray, from software.coop, called the process the end of a “longer loss-of-member-control story”, which includes Rise giving free membership to clients of the Social Enterprise Mark company, then trebling the annual fee for other members in mid-2011.

Opponents claim lack of transparency and communication

Paul Martin, director of a co-operative in Cornwall, and Brian Titley, from the Co-operative Assistant Network, both say they have some sympathy with the board of Rise, and didn’t wholly object to the plans, but contend they haven’t been given enough information about the plans and have no way of knowing that Rise’s residual assets are being transferred to a viable business.

.“I don’t know the social or business case for the proposed organisation,” says Martin. “and I don’t know the business plan.”

“If it is a wholly-owned subsidiary of Rise why can’t I get the business plan?” he asked.

Martin also says proposals he sent to the board on the future of Rise’s assets were changed without his consent.

All three members say some aspects of the communication with the Rise membership was lacking, including holding a general meeting requisitioned by members to discuss the matter on the last working day before Christmas.

SEM response: activists have a 'vested interest'

In response, Lucy Findlay, managing director of SEM, has said the terms of the new legacy trust were clearly set out in the information that was sent to Rise members. She also said that the business case for SEM was also sent out as part of the voting process.

She added that the minority of members which civilsociety.co.uk have spoken to have a vested financial interest in discrediting the board proposal that was put out to members.

She also said they fundamentally disagree with SEM as they are social enterprises which would not qualify for the Mark.

Responding, Ray from software.coop advised the opposition is not about financial gain: “Before we lost the original Rise dissolution vote, we had a financial interest, but no more than other shareholders – less than ones who hold the SEM, in fact. Since we lost, it’s actually slightly better for us financially if the SEM were to succeed as described. We opposed it because it’s far worse socially.”

Software.coop has the following statement on its website: “We do not support the Social Enterprise Mark Company mark (the yellow coffee mug rings), mainly because we believe all co-ops are social enterprises and their label is not compatible with our co-operative values.”

Findlay has said the members making the case above have “spent a lot of time” trying to discredit the SEM, its staff and board:

“We have evidence that commercial and personal information has been used and distorted to try to present an inaccurate picture on the internet and in other public places in a way that could damage the company and reputation of individuals.

“We have taken legal advice on this and are considering further action in terms of libel.”

 

Nathan Brown
Social Enterprise Advisor since 1998
Personal capacity
17 Feb 2012

Social Enterprises - whether co-operative or not - should be subject to scrutiny by their members and should not be afraid of public debate. If they are true to their aims and principles there is nothing to hide - in fact, the publicisity could be an asset.

Surely if a statement made in public is untrue, the opportunity to counter it is a great but free opportunity for PR to explain what is so great about your Social Enterprise! Turn negatives into positives. Unless there is something to hide.

The use of libel to silence dissent dirties not just SEM and its reputation as being open and accountable but also the whole movement.

The McLibel defendants gained unprecedented support globally in defending a libel action for public challenge of corporate wrong doings. I am certain that our sector will rally to defend it's own "pamphleteers".

And for the record, to ensure I am open and transparent, I should declare an "interest". I was a member of Co-operative Assistance Network until 2008 - long before this storm brewed - and have nothing but the utmost respect for that organisation's commitment to protecting the interests of co-operatives and social enterprises.

Jim Pettipher
Deputy Exec Director
Co-operative Futures
17 Feb 2012

Hmm. Given that Co-operative Futures (a long standing member and supporter of RISE, which was a co-operative of social enterprise support agencies in the south west region and with an elected member on the RISE board for a number of years) is registered as a not-for-profit with HMRC and a company limited by guarantee whose constitution forbids any distribution of surplus to our members, and that Co-operative Futures is one of the objecting members that Ms Findlay is referring to, I would ask her to explain her comments further.

Readers of this and other coverage of the sad demise of the regional infrastructure body for social enterprises of which Ms Findlay used to be employed as CEO (that would be RISE) might also like to consider - when determining the vexed issue of "vested financial interest" - by whom the same Ms Findlay is currently employed (that would be the Social Enterprise Mark Company, recipient of the assets distributed from the dissolution of RISE).

Of course none of us, Ms Findlay included I'm sure, would have wanted things to end the way that they have. After all, as members or former members or employed members of staff of RISE, we were all on the same side once and I'm sure we all still want the best for all social enterprises. I know that Co-operative Futures does and we continue in our efforts both behind the scenes and in public to work for peace to break out.

However, those efforts are inevitably undermined when an employee of an organisation that claims to exist to promote high behavioural and ethical standards in social enterprises raises the prospect of taking legal action against dissenting members that remain social enterprises in their own right.

***Content removed for breaching community standards***

Brian Titley
SW Regional Manager
Co-operative Assistance Network Limited
16 Feb 2012

RISE is a co-operative and some of its members have tried to take their governance responsibilities as members seriously. We have sought information, asked intelligent questions of our servants (the board), called meetings and proposed resolutions on the destination of the considerable residual assets. These assets, after all, have been derived largely from public funds and the members, as owners of the company, are collectively responsible for them. Those of us who have taken these responsibilities seriously should be congratulated rather than threatened.

As a co-operative itself, CAN has always taken and always will take its responsibilities in such situations seriously, has always operated and will always operate according to co-operative principles. CAN believes that it has acted in an exemplary fashion in this matter, will continue fearlessly to do so, and will defend itself against any legal challenge to the last drop of blood.

Nothing has been done so far that can not be undone. It is never too late for peace to break out nor for solutions to be found. The Rise Board should engage in constructive dialogue with the “refusnik” Members to find a way forward acceptable to all.

Brian Titley, on behalf of Co-operative Assistance Network Limited.

MJ Ray
One co-op's liaison to RISE (personal capacity)
14 Feb 2012

Personally, I spent no time during this trying to discredit the Social Enterprise Mark, its staff or its board, but I did spend a lot of time trying to stop the closure of our Regional Infrastructure for Social Enterprise co-op.

However, arguing that RISE should stay open did include explaining to other members how the board's closure plan seems worse, why we don't agree with yet more money being taken away from South West support, and why we don't feel the SEM satisfies the RISE M+A dissolution clause. That's not to say that anyone was dishonourable: just that we felt their plan was incorrect.

We still had to do our day jobs as well, so I'm fairly sure that the members' time was dwarfed by the time spent by the board and employed staff, even since the closure proposals were first mailed out in October, never mind what work was done before that.

RISE - itself a social enterprise never awarded the SEM - was what anchored the Social Enterprise Mark in the sector. I'm sorry for the whole sector for how it's ending and I hope that the other English regions fare better.

Mike Storey
md
informnorth
12 Feb 2012

This has always been a none starter. I mean, why do social enterprises actually need a mark to validate what they are doing? Don't get me wrong, there will always be those with the time, resources and money to have such things but they are the ones who often have resources for bid writing etc and not necessarily doing anything better than anybody else, but probably need validation just to hold their own. Also given that some organisations were given the 'mark' within just a few months of starting to trade and can't have had any record, let alone a decent track record, it's been of little or no perceived value whatesoever.

Rory Ridley-Duff
Senior Lecturer
(Personal Capacity)
10 Feb 2012

It is hard to read this article.

My concern is not just that infighting is continuing, but also at the level of misinformation being given out by people whose ethical standards should be much higher. Given that the issue of 'vested interests' has now been raised publicly, let get some relevant information into the public domain.

The following information was obtained from documents filed by RISE and SEMCO (The Social Enterprise Mark Company) at Companies House. RISE and SEMCO reported the following financial information in their most recently filed accounts (accounts up to 31-03-11):

RISE (Net Assets): £444,766
SEMCO (Net Liabilities): (-£98,103)

Even allowing for changes in trading circumstances, and the closure of the RDA in the South West, the following three questions have to be asked.

1. "Why would the directors/executives of RISE/SEMCO choose to dissolve a solvent company to save an insolvent, loss-making, company?"

(Surely the more sensible thing would be to dissolve the insolvent company and keep the solvent one).

2. Whose vested interests are served by the dissolution of RISE (and the transfer of its assets to insolvent, loss-making, SEMCO)?

3. Were the members of RISE told that SEMCO was insolvent (and had made a trading loss of nearly £100k) before being asked to vote for the dissolution of RISE and the transfer its assets to SEMCO?

These are serious questions because an impartial observer would probably regard such behaviour as the basis for removal (or even disqualification) of its directors.

Lastly, as other social enterprise agencies in the UK have maintained services to their regions following the closure of their RDA - even when they have far fewer assets than RISE - what business reason can be given for RISE's closure beyond the SEMCO's need for its assets?

These are questions that will surely be raised in any attempt to accuse former RISE members of libel. The above information was known to those members and they fought (unsuccessfully) for the RISE board to share it with members before a vote was taken at the AGM to close RISE and transfer its assets to SEMCO.

Rory

Carl Allen
13 Feb 2012
Response to [Rory Ridley-Duff]

Are the directors of SEMCO personally liable for the debts?

Rory Ridley-Duff
Senior Lecturer
(Personal Capacity)
14 Feb 2012
Response to [Carl Allen]

Only if someone takes the time and trouble to show they acted incompetently or unlawfully. Members / directors have limited liability providing they were competent and lawful in their actions.

Paul Martin
10 Feb 2012

I did believe that I was fundamentally in support of the mark but disagreed with some details of the criteria.

However on reflection I am starting to believe that flaws may go to the heart of a limited conception of social enterprise. I am also starting to believe that the divisive effects may be systemic. If the central concept at SEM co is so flawed and if the mark is irredeemable divisive them perhaps my disagreement is becoming fundamental?

I fear the sort of mark that could be awarded to a body with very highly paid staff but would be refused to a body composed of people working for social purposes who pay themselves close to minimum wage so as to ensure the viability of their enterprise and mission and who's only hope for a closer to average income is an end of year divi if circumstances allow. This would seem to favour patrician philanthropy over self help social enterprise.

Simply put if the high wage is above the line it is a cost and not a distribution and so OK by the mark. However if the tiny wage is augmented by a divi then the mark could see this as not OK in a small worker co-op that has made only a very small surplus. Even if the "tiny wage" example spends more of its turnover on mission than the “very highly paid” example this is not taken into account as the criteria hinges on surplus not on turnover. The sad thing is that a hypothetical worker co-op that spends more of its turnover on social purpose could have a smaller surplus and so more easily fall foul of mark criteria whilst if it spent less turnover on social purpose it could have a bigger surplus and therefore be allowed more divi by the mark!

The use of divi as a prudent pricing mechanism in consumer co-ops and a way of allowing employee co-ops to be frugal with wages so as to ensure viability without being exploitative is a great and a fair mechanism to handle risk and reward in social purpose bodies.

I think this all means that I have become fundamentally opposed to the mark since my last comment! I think it may be divisive and fear that it does not represent or recognise the diversity in social enterprise or recognise the learning in the co-operative movement.

Paul Martin
Social Enterprise Advisor
Kabin
10 Feb 2012

On what grounds does Lucy claim that we "...fundamentally disagree with SEM as they are social enterprises which would not qualify for the Mark"?

At no point has Kabin stated any fundamental disagreement with the mark. We do have some issues with a mark that appears to exclude some co-operatives. We found it strange and inconsistent that the mark was awarded to the Co-operative Group but withheld from the worker co-op Essential. I have heard rumour that Essential was refused due to member dividend yet that seems strange as I am also told that the Co-operative group distributes a larger % of surplus as a divi to members than Essential does.

The issue of the traditional Co-operative divi and the principle of member economic participation are elements that contribute to co-operatives being one of the best established and most viable types of social enterprise and contributes to our ability to create benefits for people and planet.

I am not sure how Lucy Findlay can justify saying that we wouldn't qualify? We have thought about applying but it never seemed like a top priority. I believe we would qualify, as a company limited by guarantee we distribute zero surplus to members and all our income is earned income. Further our entire operation is supporting social enterprises.

However the fact is that we have not applied so do not 100% know if we qualify? I can't see how Lucy knows either - we've never applied and the SEM is (in theory) awarded by an independent panel, says http://www.socialenterprisemark.org.uk/faq/#9

Geof Cox
10 Feb 2012

I've never wanted anything to do with the so-called 'Social Enterprise Mark' mainly because I always saw it as divisive.
I did have to chuckle at the wonderful, but I sadly suspect unconscious irony of explaining away different views on the grounds that they are put forward by 'social enterprises which would not qualify for the Mark'!
The best thing we can all do now is just forget the Mark, and work to heal the regretable divisions it has created (though I do understand this must be hard for those in the South West).

John Mulkerrin
Co-founder
CIC Association CIC
10 Feb 2012

There's a bit of a whiff emanating around this, what are the innacuracies?

No-one should roll out the threat of libel lightly or as a tactical ploy to inhibit discussion or intimidate individuals, lets leave that to football players and Top Gear presenters.

Duncan Johnson
Founder
Yodelay.com
10 Feb 2012


Where is Lucy Findlay going to get the financial backing for legal action?

I do hope it is not sourced from Public Funding. It would be extremely hypocritical if the publicly funded Social Enterprise Mark foot the bill for any personal vendettas.

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