Benefit Corporations: Novelty, Niche, or Revolution

Mathew L. Clemente, a student at Syracuse, recently posted what promises to be an interesting paper.  I am always encouraged to see law students from whatever this generation is called still interested enough in public interest to study and write about nonprofit related issues.  I wonder, though, if Benefit Corporations are really something “remarkable” or just “old wine in new skins.”  Even taking into account the prohibitions against private inurement and excess benefit, I’m not sure that the line between for-profit and nonprofit was ever really so clear as to support the notion that the explicit blending of social responsibility and profit-making is something new.  I’d like to see a restrospective account of the similarities between the two types of entities.  I bet we would find that except for those corporations that serve the poor, there really is no difference betweeen for profit and nonprofit entities.  In the meantime, here is the abstract from Benefit Clorporations:  Novelty, Niche, or Revolution?”

In recent years, social entrepreneurs have begun to do something remarkable. Rather than pursue purely profit — like a traditional corporation — or pursue purely the public good — like a tradition nonprofit, social entrepreneurs have begun to do both. In response to increased market demand, several states have created new hybrid corporate forms to streamline these social enterprises. The rhetoric surrounding the emergence of social enterprise tends to be hyperbolic. Some see social enterprise as a potential panacea to the ills and excesses of corporations. Others view it as a potentially dangerous fad. This Note explores social enterprise and benefit corporations, currently the most popular form of social enterprise.

Part I focuses on the social enterprise movement more generally. After exploring the role of social enterprise in the market, Part I turns to the shortcoming of traditional forms. There, it is shown that the traditional nonprofit-for-profit paradigm is ill suited for the needs of social entrepreneurs. Market participants — consumers, investors, entrepreneurs, and employers — all increasingly demand entities that pursue both profit and the social good. Although companies often purport to be concerned with the social and environmental issues, it is difficult for these groups to tell a good company from good marketing. Finally, Part I concludes by hypothesizing about the ideal social enterprise.

Part II focuses on the benefit corporation, evaluating whether benefit corporations represent a niche, novelty, or revolution. It assesses benefit corporations against three criteria, how they compare to existing law, low-profit limited liability corporations (an alternative hybrid legal form), and the ideal social enterprise. In doing so, Part II considers the two main criticism of benefit corporations — that they are neither necessary nor sufficient to establishing a sustainable social enterprise. Ultimately, this Note concludes that benefit corporations are neither a revolution nor a novelty. Instead, they currently represent a growing niche in the market — one that deserves cautious optimism.

dkj