Chapter 04 · The social stock exchange
How to read a social disclosure
A social disclosure is the document that lets a stranger test a claim. This chapter is a reading order. It assumes the document is honest enough to be worth reading, and it tells you where it usually is not specific.
Start with the legal identity
What kind of body is this: a trust, a society, a section-8 company, a for-profit company? Who governs it, and can the governors pay themselves? The answers decide which law applies and what a ‘profit’ even means. If you cannot find the legal form in the first few pages, you are reading a brochure. Brochures are allowed. They are not disclosures.
Then the money, for the last two years
You want income split by source — donations, grants, programme fees, trading revenue — and spending split between the programme and everything else. A single pie chart labelled ‘impact’ is not this. Administration costs are not a scandal; an organisation with no administration is an organisation that is not keeping books. What you are looking for is a drift: programme spending falling as a share, related parties being paid large fees, or a grant that is about to end and that supplied most of the income. A one-year snapshot hides the grant that will not be renewed. Two years is the minimum. Three is better.
Then the outcome, with a unit
| A claim that cannot be checked | The same claim, rewritten so it can |
|---|---|
| We empowered the community. | We ran twelve centres through the year. Average attendance was 40, against a capacity of 70. Three centres closed. |
| Lives were transformed. | Of the 200 people who finished the course, 110 were in paid work six months later, by a survey with this response rate. |
| We are scaling rapidly. | Income was ₹2 crore, of which ₹1.6 crore was one grant. The grant ends in March. |
The right-hand column is not harsher. It is usable. An organisation that will not publish a unit is asking you to fund a mood. You can still do that, with money you have already set aside for gifts you do not need to evaluate. You should not confuse it with diligence.
The auditor and the gaps
Read the auditor’s report the way you would for a company: qualifications, emphasis, anything that says the books were not ready. Then read what the organisation says it will do in the next year, and what would make that plan fail. A disclosure with no failure condition is a promise to declare success. Finally check freshness. A document about the year before last, published long after the year ended, is a weak guide to the organisation that would receive your money next month.
What to remember
- Legal form and governance first, then two or three years of money, then outcomes with units.
- Administration costs are normal. A collapsing programme share, a related-party fee, or a single expiring grant is the item to mark.
- Rewrite slogans into counts. If the document refuses to, believe that this is the standard of evidence on offer.
- Read the auditor’s qualifications and the date of the numbers.
- No stated way to fail means every result will be described as success.