Thanks to Chris Newis for the pointer to this story. The BBC website recently carried a fascinating piece about social enterprise Circle’s acquisition of a ten-year contract to run Hinchingbrooke hospital, near Huntingdon, in Cambridgeshire.
Circle describes itself as “a social enterprise that forms the largest partnership of healthcare professionals in Europe – over 2500” and is 49.9% employee-owned. Its aim is to deliver world class health care in hospitals with a five-star hotel environment — and to do this while operating, according to Ali Parsa, its ex-Goldman Sachs founder, as a social enterprise where clinicians are in charge.
In the case of Hinchingbrooke hospital, the deal will require Circle to meet health service standards, pay off the hospital’s estimated £40m debts, and pay a return to the shareholders which have a majority 50.1% stake in the company. Circle’s legal structure, according to this coverage, is ‘fiendishly complex’.
So, can Circle really be described as a social enterprise? It isn’t fully employee-owned (but then neither are many social enterprises), and it is profit-making. It has a strong social ethos and delivers healthcare, a fundamentally ‘social’ mission; but again, many private health companies would say exacly this about themsleves.
Writing on the Guardian’s Social Enterprise Network website, SEC’s Peter Holbrook says, “The fact that Circle health is going to reinvest the majority of its profits back into the local community and has a strong ethos around employee ownership means that society will benefit. It shows other social enterprises that we can compete in the market with some of the largest multi-million pound corporate organisations that exist and that we should feel bold about the opportunities that are ahead for us. Circle’s win means that we’re not just nice businesses but that we’re really good at business. I think that in some areas, people haven’t always taken social enterprise seriously.”
Commenting on the same site, Karen Jennings, UNISON’s head of health, says, “Basically, this is an organisation that is backed by a merchant bank and although they have set up independent sector treatment centres, there’s no indication from those centres that staff had ownership of it in the true sense of a mutual or social enterprise.”
Interestingly, it was not SEC but the Civil Society website that ‘pressed’ Circle to explain how it is a social enterprise. In an article dated 3rd December 2010 Civil Society says, “…’social enterprise’ is not a constitutional form in law, so Civil Society pressed Circle on how it is actually constituted. Spokeswoman Christina Lineen confirmed that Circle is registered at Companies House as a private limited company. She said that Circle employees, from the most senior doctors to the porters, own just over 50 per cent of the organisation, with the rest owned by external investors.”
This seems a more accurate view — except, according to Circle’s own current information, employe ownership accounts for 49.9% of shares, not “just over fifty per cent” as previously claimed.
So there you have it. A private limited company in which employees own a minority shareholding. I do wish — for everyone’s sake, including that of the NHS and the social enterprise sector — that our national body SEC would do more fact-checking before it decides to co-ordinate the cheerleaders…