Meaning of Social Capital

Meaning of Social Capital

According to DigoPaul, the concept of social capital can be analyzed from two perspectives: accounting and sociology. As an accounting term, social capital is the value of the goods or money that the partners contribute to a company without the right of return.

In this way, the share capital (which is recorded in an accounting item) grants the partners different rights depending on their participation and represents a guarantee against third parties. This is a stable figure, although negative results can lead to bankruptcy and then the company will already have the necessary resources to meet its obligations to third parties.

In this sense, it is also important to establish that there is also what is known as minimum social capital. This term is used to define the capital that every company must maintain at least. It is important to underline that this will be one or the other depending on the type of company it is, in this way a public limited company must have a much higher minimum share capital than one that is limited liability.

In another sense, the capital stock is a liability (debt) of the company towards the partners. To modify this contribution, a series of legal procedures must be followed. It is necessary to distinguish between the notions of capital stock, equity (the total assets and liabilities of the company) and equity (the effective difference between assets and liabilities).

In addition to all of the above, we have to bear in mind that within a company the increase in capital stock can take place. This is achieved through different actions or situations such as, for example, monetary contributions, non-monetary contributions, by transformation of profits or reserves as well as by offsetting credits against society.

In the same way, it is also possible that a specific company suffers the reduction of its share capital. In this case, the circumstances that may lead to this event are the return of contributions, the increase in the legal reserve, the forgiveness of passive dividends or with the clear objective of eliminating losses.

The last mentioned fact is decided to carry out with the intention of achieving that the existing balance between what is capital and net worth is recovered. Hence, this compensation for losses can be achieved either by reducing the accounting dimension of the company or through the profits of the company.

For sociology, social capital is that which enables cooperation between two parties. The notion does not necessarily imply something positive, since contacts between people can lead to negative events (such as mafia societies, for example).

In other words, social capital implies the sociability of a human group, with the aspects that allow collaboration and its use. Sociologists emphasize that social capital is formed by social networks, mutual trust, and effective norms, three concepts that are not easy to define and that may vary according to the analyst’s conception.

Social Capital