On May 26, the International Forum on Nongenetic Inheritance and Innovation, one of the key activities of Nanjing Historical and Cultural City Expo, opened in Nanjing.
Chen Keyi, founding partner of Fengfeng Evergreen and initiator of Fengfeng Public Welfare Foundation, was invited to participate in the forum. He spoke at the main forum on the topic of "Giving a Future to the past and a life to Social enterprises". In view of the difficulty that social enterprises cannot take into account both public welfare and benefits at present, a unique and effective corporate governance structure and benefit sharing rules of social enterprises have been established through creative exploration and thinking of Fengfeng Changqing and inheriting culture, and this is named as the "Inheritance-Fengfeng" social enterprise investment model, hoping to engender long-term vitality of social enterprises.
The difficulties of social enterprise
According to the reporter, in the domestic public welfare industry, it is widely believed that social enterprises are innovative solutions to social problems through commercial means. The primary purpose of starting a social enterprise is to solve social problems, which makes it different from traditional business enterprises; A successful social enterprise can achieve financial sustainability through its own operations, which sets it apart from traditional public interest organizations.
The three main elements of a social enterprise are the setting of primary goals, the business model, and the way in which profits are distributed. However, on a practical level, the industry generally has different views on the business model and how the profit distribution method works. Especially in the interest distribution mechanism, such as whether dividend, how dividend and other issues, there is no unified standard.
Social enterprise is difficult to clearly define and define, perhaps precisely because it is an intermediate state between commercial enterprise and public welfare organization, between commercial and social attributes, without a clear and recognized boundary. At the same time, it also means that social enterprises have multiple bottom lines of business and public welfare, and how to make a balance involves the game between multiple interest tensions.
In recent years, the development of Chinese social enterprises receives more and more attention, and began to form a upsurge of social enterprises. However, it is precisely the ambiguity and uncertainty of this intermediate state that lead to the absence of practical operational framework criteria and measurement indicators for social enterprises in China except for the above fundamental characteristics. As a result, in reality, the development of social enterprises is uneven and speculative, which greatly hinders the healthy development of social enterprises.
Chen Keyi believes that the difficulty of social enterprises comes down to the most fundamental point is how to balance public welfare and benefits. At present, there are no widely accepted answers to these questions, which must be addressed if the organizational form of social enterprise is to be effectively promoted.
Social enterprise investment model of capability-peak
It is under such thinking that Jianfeng and Qiancheng try to make a breakthrough in promoting the development of social enterprises. Chen Keyi believes that the key to solve the problem lies in the establishment of clear rules and structure. Accordingly, a model is designed to determine a relatively quantitative and transparent framework in terms of profit distribution mechanism and corporate governance structure.
The innovation is reflected in the following two aspects:
In terms of corporate governance, this model is based on the team of social enterprises holding common shares to dominate the board of directors and operation execution, while investors hold preferred shares to distribute dividends and occupy a minority of board seats.
In terms of income distribution, the team promises to use 50% of the dividends to charity and public welfare. Investors have priority to get 7% fixed simple interest dividends every year. Annual distribution is not compulsory and can be accumulated.
Chen hopes to use this framework to set up the way social enterprises operate, and it is the framework that is currently being adopted. So we named it the "start-to-peak social enterprise investment model."
After further combing, the reporter came to understand the core logic of this model:
First of all, the team leads the venture, so the team should enjoy the dividends of realizing the business value of the enterprise. Only in this way can the team be motivated. By investing 50% of the profits in charitable causes (including social enterprise investment), the team can also keep the original intention of public welfare and continue to explore in this field.
Secondly, for investors, setting a fixed return on simple interest can ensure that they are not completely driven by profits when making investments. This requires investors to be more interested in public welfare, so that they can pay more attention to the long-term development of social enterprises.
Third, why give investors a fixed return of 7%? For investors, this is investment behavior. In addition to the social benefits and returns that are difficult to quantify, in terms of quantifiable economic benefits and returns, the basic principle of investment is to preserve and increase value, and the most basic demand is to resist inflation. After a rough calculation, we decided to guarantee the interest of the investment at 7%, which is similar to the bank loan rate. This is different from the bank loan, does not require the guarantee of capital protection, and does not require a certain annual dividend distribution, financing cost is lower for enterprises.
Finally, in this model, companies are not required to break even, and annual dividends are not mandated. It allows enterprises to have greater flexibility and develop at their own pace. At the same time, they have external financial support, so that the financing costs and risks of enterprises are relatively low.
Chen Keyi expressed the hope that through this framework, the governance structure and profit distribution rules of social enterprises are relatively reasonable, so that the team and investors can have a relatively reasonable return.
Multiple explorations of social enterprise
The reporter further learned that at present, there are various explorations on social enterprises in China, and many organizations are trying to promote the definition and development of social enterprises based on their own characteristics.
For example, the Shenzhen Charity Fair's certification of social enterprises requires a fixed dividend ratio between 35% and 50%;
Some investors require that 1/3 of the profits of social enterprises be used as dividends, and 2/3 be allocated to the board of directors (back to the public welfare industry).
Another example is the establishment of two independent legal entities, commercial enterprises and public welfare organizations. Public welfare entities hold a certain proportion of shares in the enterprise, and part of the profits of the enterprise are donated to public welfare entities.
Some institutions promise never to pay a dividend, or not to pay a dividend for a certain period of time, such as the first five years;
Another example is that both parties have orally confirmed that the organization is a social enterprise in nature, but it still adopts the corporate structure and rules to operate.
In fact, there is no right or wrong rule for the equity structure and profit distribution of social enterprises, and there is no unified standard in China. Chen Keyi said that the Qicheng - Fengfeng social enterprise investment model is a top-level design scheme that has been repeatedly discussed by both sides under the same values, in order to more efficiently promote the healthy and sustainable development of Qicheng, a social enterprise bearing the mission of revitalizing Chinese traditional culture. Hopefully, it will serve as a useful reference for those who truly care about and promote the development of social enterprises. At the same time, we also advocate that more social enterprises refer to this model, and hope to help more investors enter the social enterprise investment field on a large scale, so as to achieve common growth of everyone.
At the same time, the details in the model can be adjusted flexibly according to the actual situation. The specific proportion of numbers involved in this model is the result of joint discussion between capstone and dangerous peak, which has the characteristics of individalization. Chen Keyi also told an episode of Capstone design model: After Jianfeng proposed a fixed return of 7%, the start-up team hoped to bring more attractive returns to investors, thinking that this proportion was too low, but Jianfeng thought it was sufficient and appropriate, and finally persuaded the team to accept the proposal of 7%. Therefore, when it is applied to different cases, the capital side and the enterprise can fully discuss and negotiate on the basis of the same values, according to the reality of both sides, and work out a reasonable proportion suitable for their respective development.
He is confident about the future of this model, and says that to promote the effective development of social enterprises, we need to establish clear and concrete rules and structures at the early stage, and delineate the practical boundaries, rather than just pay lip service to promises or guarantees.
