Reconciling the social sector with external accountability requirements: Lessons from stewardship theory

Abstract

Not-for-profit organisations are increasingly being held to account for their social performance. Due to their resource dependency, they generally rely on external financial resources to ensure their missions. This alternative is usually coupled with social accountability requirements from private investors. Given their externally induced nature, social accountability initiatives might result in the implementation of management control systems imported from for-profit organisations without any real consideration – and, consequently, leading to an oversimplification – of the social sector’s characteristics and complexities. Relying on both agency and stewardship theories, we consider how to reconcile external reporting obligations with the characteristics of non-profit organisations. To this end, we use a single qualitative case study of a social organisation responsible for housing services, which recently introduced a reporting system to meet its private investors’ external requirements. We stress the potential risks of implementing an agency theory–based system in a social context and maintain that the expected accountability targets are unlikely to be reached. We also make recommendations to improve the current system by drafting new metrics.