TY - JOUR
AU - Vicente, Lécia
AB - [C]orporations can do good, and that they do. But they cannot, and do not, do good at the expense of doing well. “Doing well by doing good” is the guiding principle. Doing good for its own sake is out of bounds. Which limits profoundly how much and what kind of good corporations can do, while licensing them to do bad if that, rather than doing good, is the best way to do well.1 INTRODUCTION In a statement issued by the Business Roundtable in 2019, 181 CEOs of major corporations committed to “lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders.”2 It only took a decade marked by the Great Recession, unthinkable levels of poverty and inequality, migratory fluxes, and social unrest, to prompt this statement. Since the Business Roundtable Statement, there has been a new debate about corporation’s purpose and political roles in developed and developing countries as well as emerging economies.3 A vital question is: do corporations have a comparative advantage over individuals and the state when it comes to changing the status quo to benefit corporate constituencies, such as employees and social welfare?4 In the last decade, social enterprise emerged as a part of this debate.5 Social enterprise grew out of the idea that businesses can do well by doing good. Supporters of this vision of “stakeholder governance” believe that enterprises can mind the bottom line without disregarding social issues and the environment.6 However, as commercial undertakings whose sustainability depends on their profitability, businesses’ detachment, solidarity, and welfare-driven agenda are heavily undermined by market pressure to mind shareholders’ wealth maximization. Still, due to their capacity to anticipate a change of status quo ahead of the state during scenarios of crisis or systemic risk, businesses can adapt and even join individuals to fight for social, political, and economic change.7 How honest are businesses’ efforts to change? Are their efforts solely motivated by self-interest? Can it be any other way? Actions attributed to corporations with a social focus have been debated as corporate social responsibility strategies are often deemed to enhance profit maximization. Given the skepticism corporations face when they refrain from maximizing shareholder value to engage in socially charged activities, one must ask—is social enterprise a new form of business enterprise or is it merely a measure to address unavoidable problems like climate change, economic inequality, social injustice, and employee max exodus in the “great resignation” following the Covid-19 pandemic?8 It is not surprising that Larry Fink, who, as BlackRock’s CEO, is one of the world’s most prominent fund managers, addressed, in his letter to the CEOs entitled The Power of Capitalism, the need for board of directors and CEOs to consider employees’ interests as much as they consider their companies’ bottom-line.9 It is not surprising that publicly held companies like Veeva value employee success to the extent that they convert to a Delaware public benefit corporation to live by that value.10 This Article examines the status and evolution of social enterprise in the United States. It is part of a broader comparative endeavor. This Article scrutinizes the idiosyncrasies of social enterprise while trying to avoid potential errors of perspective.11 The last legal form for traditional business enterprises, the limited liability partnership, was created in 1991. The Delaware legislature created the newest form for social enterprise, the statutory public benefit limited partnership, in 2019. On one hand, this Article sheds light on the role of legal forms that house traditional businesses—the corporation, the limited liability company, and the partnership—during a global political-economic order in flux.12 On the other hand, this Article discloses the roles of traditional business forms and social enterprise in addressing social justice, economic inclusion, and sustainability during the devastating COVID-19 pandemic.13 Where appropriate, I zoom in on technical aspects of corporate law and corporate governance and report how changes in these fields mirror a renewed market dynamic. At times, the focus is on the public benefit corporation in Delaware. Currently, the benefit corporation is the most used form for social enterprise in the United States. Delaware has successfully led other states in competition for companies’ incorporation due to its statutory innovation, knowledgeable judiciary, tax incentives, and overall reputation.14 This Article is structured as follows. Part I focuses on defining social enterprise. Part II describes elements of traditional legal forms for business enterprises and social enterprises. Part III is devoted to a social enterprise’s lifecycle. Part IV explains certifications and metrics for social enterprise. Part V concerns subsidies and benefits. Part VI illuminates issues regarding private capital. Part VII addresses prospective changes in the law. Part VIII concludes. I. WHAT IS A SOCIAL ENTERPRISE? A. The Concept of Social Enterprise The concept of social enterprise is not clearly defined in the United States.15 It has been used to signify “the use of nongovernmental, market-based approaches to address social issues.”16 The Social Enterprise Alliance (SEA) has defined social enterprises as “[o]rganizations that address a basic unmet need or solve a social or environmental problem through a market-driven approach.”17 For this reason, some authors refer to social enterprises as hybrids. This Article focuses on differences and similarities among different types of business undertakings. To distinguish social enterprises from traditional business forms, such as limited liability companies (LLCs) that are also commonly referred to as hybrids, social enterprises are better defined as dual-purpose organizations.18 Further, social enterprises overlap with the nonprofit industry, particularly nonprofits that generate revenue and are registered as section 501(c)(3) tax exempt entities with the Internal Revenue Service (IRS).19 Several states have enacted legislation to introduce forms of social enterprise.20 In the past decade, there has been a dramatic change in consumers’ needs which coincides with a generational shift, increased levels of economic inequality, and loss of faith in the public sector. These problems are likely to impact companies’ bottom lines and cannot be solved only with philanthropic capital. Social enterprise has emerged in the margins of societal, economic, and technological changes. While the outstanding development of technology and artificial intelligence spells out the advent of robot-directors in the boardroom,21 the rise of social enterprise is a notable event. B. Industry and Distinctive Features of Social Enterprise Social enterprises develop their businesses in multiple industries such as agriculture, health, life sciences, energy, natural resources, water and sanitation, education, skills development, finance, transportation, and restauration.22 In their book, Young, Searing, and Brewer use a zoo metaphor to point out the many “species” of social enterprise as an illustration of how difficult it is to restrain social enterprise to one type of industry.23 Social enterprise is a distinct fusion of social and environmental missions with a revenue-generating activity.24 In the United States, social enterprise mirrors a more private and business-oriented view. In Western Europe, social enterprises are embedded in social and governmental perspective that aligns with the model of welfare state which gained general acceptance after World War II.25 Unlike the United States, Western European social enterprises are more likely to adopt legal form of nonprofits or cooperatives.26 Employment-focused cooperatives are considered social enterprises in Western Europe. Work integration social enterprises (WISEs) are cooperatives with social and employment objectives.27 In contrast, U.S. social enterprises are simultaneously driven by market and social purpose.28 WISEs are especially relevant in informal economies where market actors seek a sense of belonging in a community that upholds familiar moral norms and values.29 Considering their constant evolution, it has been challenging to identify and quantify social enterprises. Some statistical treatment of these business entities can be found at the state level. As of February 23, 2022, 2,314 L3Cs were counted in the United States in Vermont, Michigan, Wyoming, Utah, Illinois, North Carolina (which repealed its L3C law effective January 1, 2014), Louisiana, Maine, Rhode Island, the Oglala Sioux Tribe, and the Navajo Tribe.30 This amount represents an increase since prior data indicated the existence of 2,015 L3Cs in the United States. Oregon provides data regarding corporations and LLCs designated as “benefit companies” in the state.31 Other states provide similar data.32 However, such data is difficult to navigate. B Lab, a nonprofit corporation at the forefront of social enterprise development, has tracked the number of Benefit Corps, such as Kickstarter, King Arthur Flour, Patagonia, and Solberg Manufacturing.33 C. Social Enterprise Longevity and Prominence William Drayton (United States) and Muhammad Yunus (Bangladesh) are prominent figures in the social enterprise sphere.34 Drayton is a prominent contributor to the social innovation school of thought.35 In 1980, Drayton founded Ashoka, one of the oldest social enterprises in the United States.36 Lauded as a 2006 Nobel Peace Prize laureate, Yunus created Grameen Bank which is also known as “the bank for the poor.” In 1983, he established a system of microcredit for poor Bangladeshi villagers. His system helped lift millions of people, especially women, out of poverty in Bangladesh.37 In the context of a free market, the idea of “business as social business” that Yunus delivered in his Nobel Lecture does not defeat the idea of capitalism, which is the prevalent backdrop of social enterprise development in the United States. As Janelle Kerlin describes, elements such as market functioning, state capacity and international aid influence the emergence of social enterprise.38 I stress the significance of “actors” as additional element.39 In 2019, Forbes ranked the top five most innovative and impactful social enterprises—Me to We (Canada), Ashoka (United States), Grameen Bank (Bangladesh), Babban Goa (Nigeria), and Goodwill (United States). Ashoka and Goodwill are both Internal Revenue Code section 501(c)(3) nonprofits. As Me to We is a Canadian company, Ashoka takes the position of the most prominent United States-based social enterprise.40 D. Does Size Matter? It is unclear whether the metric to define the largest or most prominent social enterprise should lie in profitability, number of investors, or level of social impact. To assess company’s commitment to social causes and the environment, B Lab uses the company’s ownership structure, size, and profitability to determine broader impact. Companies like Bi-Rite Market, Bridgetown Natural Foods, Cooperative Home Care Associates (CHCA), Dr. Bronner’s, Home Care Associates of Philadelphia, Inc., TOMS, Patagonia, and Sunrise Banks have more than 250 employees and have been ranked in B Lab’s Best for the World list for their positive impact and best business practices regarding community, environment, customers, workers, and governance.41 In 2015, Laureate Education Inc. became the first Delaware public benefit corporation (PBC) through an initial public offering (IPO).42 Lemonade Inc. filed for its IPO to become a Delaware PBC in 2020.43 Coursera44 and Vital Farms45 are two other Delaware PBCs. Patagonia is a California Benefit Corporation.46 Laureate, Lemonade, and Vital Farms were all privately held corporations before becoming PBCs. In January 2021, Veeva Systems’ shareholders overwhelmingly voted for it to become the first publicly-held corporation ever in the US to convert to a PBC.47 A growing number of publicly held corporations, which are not Benefit Corporations. or PBCs, have achieved the status of Certified B Corporation provided by B Lab. Charlotte’s Web Holdings, Inc., based in Colorado and operating in the United States and Canada,48 and Amalgamated Bank,49 are examples.50 E. Controversial Aspects of Social Enterprise Managers of the traditional corporation must abide by fiduciary duties of care, loyalty, and good faith.51 Benefit corporations’ managers’ duties are characterized by finding a balance between shareholders’ interest in maximizing profit and stakeholders’ interests in pursuing public benefit. Delaware General Corporation Law (DGCL) section 362(a) provides that “[a] public benefit corporation shall be managed in a manner that balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incorporation.”52 DGCL section 362(b) defines public benefit as “a positive effect (or reduction of negative effects) on one or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.” DGCL section 362 is unclear about how managers will be liable for failure to satisfy the balancing requirement outlined in section 362(a). Directors fulfill their fiduciary duties to stockholders and the corporation “if such director[s’] decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.”53 DGCL section 362(a) does not extend directors’ duties of care, loyalty, and good faith to “those materially affected by the corporation’s conduct.” Furthermore, corporations can limit director liability by opting into DGCL section 102(b)(7). Failure to satisfy section 362(a) balancing requirement does not constitute a breach of duties of good faith or loyalty unless the certificate of incorporation provides or if there is a self-dealing conflict of interest that would be considered a breach even if the corporation was not a PBC.54 Regarding these rules’ enforcement, section 367 maintains that only stockholders can file individual, derivative, or other actions to enforce the balancing requirement set forth in sections 362 and 365. In the context of Benefit Corporations, managers’ fiduciary duties are frequently defined as “dual fiduciary duties” for managers have obligations to both the company (and its stockholders) and other stakeholders. However, lodging exclusive enforcement rights with stockholders inevitably means managers will care primarily about stockholders’ interests in benefit corporations and PBCs. This fact demonstrates social enterprise’s underlying business and profit-oriented configuration over its public interest orientation. This feature of the social enterprise’s legal framework constitutes a self-defeating paradox. This paradox exposes the social enterprise to market uncertainty and investor skepticism. Another source of controversy is the financial ties between corporations and nonprofits that are difficult to trace. Examples include when nonprofits receive donations from corporations, for which nonprofits provide beneficial comments during political or regulatory processes.55 Nonprofits often lack transparency, especially regarding the transfer of funds. The purpose of nonprofits’ connections to other organizations raises questions of oversight given that most nonprofits have disclosure responsibilities to the IRS and donors, which may include the federal government or the states. Lack of governmental oversight, complicated in times of systemic shock such as the Covid-19 pandemic, may render nonprofits and the programs they intend to support susceptible to fraud and abuse. F. Funding Social Enterprise A year before Maryland passed its Benefit Corporation Legislation, in 2009, Congress enacted The Edward M. Kennedy Serve America Act, an Act to reauthorize and reform the national service laws.56 It considerably increased funding for AmeriCorps, a governmental agency that supports service and volunteering, and created the Social Innovation Fund (SIF). In 2015, Congress amended the Jumpstart Our Business Startups Act (“JOBS Act”) to allow use of crowdfunding by social enterprises.57 While such legislative output could trigger a wave of financial support, the reality is that social enterprises still struggle to obtain funding. Customers’ and funders’ lack of understanding of, and trust in, social enterprise poses a clear challenge in accessing capital.58 Additionally, investors feel ambivalent regarding the commercialization of the nonprofit sector. This ambivalence leads some investors and critics to ask hard questions, such as who gets to decide what issues have social significance.59 Despite the challenges, social enterprise attracts funding from “social investors,” such as individuals, philanthropists, for-profit organizations, and governmental grants.60 Depending on their size, social enterprises may be eligible for microfinance services, climate “finance” funds, social investment competitions, and social impact bonds introduced or supported by governments.61 When it became listed on the Bonds Market of the Singapore Exchange in 2017,62 Impact Investment Exchange (IIX)’s Women’s Livelihood BondTM 1 (WLB1) was the world’s first gender lens and impact investing instrument to be listed on a stock exchange.63 The U.S. Agency for International Development’s (USAID) Development Credit Authority provided a loan guarantee for WLB1.64 Dana Brakman Reiser and Steve A. Dean suggest that the standardization of hybrid financial instruments may overcome the mistrust and fear of commitment stemming from the “unique assurance game” between social entrepreneurs and investors. The suggested financial instruments would combine debt and equity, such as convertible bonds which combine debt with equity attributes or preferred shares which combine equity with debt attributes. Other financial constructions derive from the negotiation of individually tailored contractual provisions to meet the specific needs of social entrepreneurs and investors.65 II. FORMS OF ORGANIZATION FOR SOCIAL ENTERPRISES A. Forms of Social Enterprise and Pursuit of a Social Mission The first form of social enterprise provided by legislation in the United States was the low-profit limited liability company (L3C) in Vermont in 2008.66 Since then, several state legislatures have authorized alternatives to the traditional corporate legal forms that expressly permit the consideration of a broader set of stakeholders in corporate decision-making.67 The current forms of social enterprise legislatively contemplated across states in the United States include: the benefit corporation;68 the public benefit corporation (PBC), enacted in Delaware in 2013 and amended in 2015 and 2020;69 social purpose corporation (SPC), enacted for the first time in Washington in 2012;70 benefit limited liability company (BLLC), first enacted by Maryland legislature in 2010;71 and the statutory public benefit limited partnership (SPBLP), created in Delaware in 2019.72Benefit corporations have become the most popular form of social enterprise while L3Cs have fallen short of attracting investment.73 The Office of Social Innovation and Civic Participation,74 the U.S. Small Business Administration,75 the U.S. Advisory Board on Impact Investing, the Corporation for National and Community Service (CNCS),76 and the USAID77 are relevant institutions that define the social enterprise context. These institutions impact investment and how social enterprises pursue their mission. B. Prioritizing Stakeholders’ Interests: Which Stakeholders? In the 1980s, the United States experienced a wave of corporate takeovers. Since then, the market for corporate control took off and shareholder wealth maximization has dominated corporate law and governance.78 This understanding led managers to pursue profits to the detriment of stakeholders’ other interests. This occurred despite the fact that managers even of a traditional business corporation have no statutory obligation to consider only the interests of shareholders,79 but rather are allowed to consider the interests of other stakeholders provided managers follow their fiduciary duties of care, loyalty, good faith,80 and do not usurp the company’s business opportunities.81 These obligations and their enforceability vary from state to state and may be configured differently in the company’s organic documents.82 Litigation challenging the actions of directors who do not prioritize shareholder value at the expense of customers, creditors, employees, environment, or society in general has occurred for more than a century.83 When they face liability, directors are protected by the business judgment rule, which maintains that they are not liable for an honest mistake due to their business judgment. The business judgment rule provides tremendous discretion for directors to balance shareholder and other stakeholder interests in all but the most extreme circumstances.84 C. Elements of Traditional Legal Forms for Business Enterprises Traditional business enterprises are like a foil onto which social enterprise legal forms have developed. The following aspects of traditional business enterprises are relevant for establishing differences, similarities, and understanding the most distinctive features of social enterprises and reason for their emergence. For the most part, traditional business enterprises are standardized. Forming a corporation, an LLC, limited liability partnership (LLP), or limited partnership (LP) requires documents to be filed with a state authority, such as the Secretary of State. General partners, in contrast, can inadvertently form a partnership by merely acting like one.85 Additionally, incorporators or a company’s legal representatives must acquire an Employer Identification Number (EIN) or a Federal Tax Identification Number (FITN) to identify the company. They must identify the appropriate federal tax classification and pay any applicable fees. From the moment they are created, business organizations acquire specific features in areas such as legal personality, investors’ ownership, liability, transferable ownership, and delegated management. These features assume different nuances depending on the business enterprise’s legal form.86 1. Organization under National Law and Model Legislation Unlike the societas europea—a supranational legal form of business regulated by EU laws and a product of EU harmonization—businesses in the United States do not have the option to choose an exclusive supra-state legal form of business.87 Model legislation is implemented or followed differently by the states. Such legislation includes the Uniform Partnership Act created in 1914 and revised in 1997 by the National Conference of Commissioners on Uniform State Laws (NCCUSL),88 the Model Business Corporation Act (MBCA) drafted by the Committee on Corporate Laws of the Section of Business Law of the American Bar Association,89 the Uniform Limited Liability Company Act (ULLCA), and the Revised Uniform Limited Liability Company Act (RULLCA).90 The most common business entities are the sole proprietorship, the partnership (including the general partnership, the LP, and the LLP), the corporation,91 and the LLC.92 Although there is a core understanding of each of these forms, their nuances vary across states. 2. Permissible Objects of Adopting Entities The company’s object refers to the nature and purpose of the business. Discussion around corporate purpose is longstanding in U.S. corporate law history. From Dodge v Ford, in 1919,93 Milton Friedman’s popular 1970 New York Times op-ed,94 the American Law Institute’s Principles of Corporate Governance drafted in the 1980s through early 1990s,95 to the Business Roundtable Statement in 2019, the corporation’s purpose has been highly debated. Currently, climate change has re-ignited conversation about the company’s object, nature, or business purpose. Generally, the object should not be illegal, go against public interests or undermine the country’s rule of law. However, the company’s object may or may not be in line with broader societal interests. Companies are not legally allowed to develop any businesses other than those stated in the object clause in the company organic documents, such as the certificate of incorporation. Any lawful business purpose clause, as well as incorporation under the business corporation law, expresses a purpose to carry on a business for profit. This, in turn, leads to the argument that directors must pursue a shareholder profit maximizing objective, unlike a corporation formed under other state laws allowing for the formation of nonprofit corporations. 3. Stakeholders’ Rights to Participation in Management For the most part, traditional business enterprises contemplate the separation of management from ownership to varying degrees.96 For example, corporations (from which benefit corporations derive their legal framework), are managed by the board of directors that must approve any major business decision. Directors may be shareholders or officers, although neither status is required.97 Shareholders elect directors, which gives shareholders some power to shape management and control the boardroom. Shareholders’ control of management is limited as they need access to inside market information, which is not always readily available. Thus, investors tend to vote on actions that are initiated by the corporation, such as mergers and acquisitions or conversion into a social enterprise.98 Although other stakeholders typically do not hold rights to management in the United States, the debate around this issue is not new. Creditors may play an active role in the corporation’s governance.99 In addition, employees’ terms of involvement are not straightforward.100 Like German practice of codetermination, appointing workers to the board of directors is often seen as a good mechanism to implement stakeholder capitalism, particularly in the context of the Environmental, Social, and Governance (ESG) movement.101 However, data on this subject is mixed. More research must be done to discuss the evidence regarding workers’ actual impact on boards of directors.102 4. Voting Rights and Other Governance Rights of Investors and Other Stakeholders Due to delegated management, there has been a dissociation of ownership from control for investors.103 Voting rights allow investors to exert some control in the company. There has been considerable debate regarding shareholders’ proposals and access to proxies in the corporation’s context, revolving around the following questions: Are proposals and access to proxy solely a matter of procedural issue? Can shareholder proposals and access to proxy legitimately constitute a battleground for substantive policy fights taken over by investors? By “substantive policy fights” I mean those related to director’s nomination and social issue proxy proposals that are more likely to favor sociopolitical, economic, and ideological issues unrelated to the company’s business and with which not all investors agree.104 Social issue proxy proposals are relevant to understanding the overall connection between social benefit and corporations. Such proposals show the potential for traditional corporations to serve a social benefit function without the need for new forms.105 On the other hand, if there are investors interested in social issues, their interest could be indicative of social enterprises’ potential to attract funding. The financial market is not an optimal platform for social change in the long-run due to notable market information asymmetries. However, financial markets’ shortcomings and the impact of social issues on the bottom-line of corporations are part of corporation’s historical evolution leading to the creation of social enterprise. The questions about social issue proxy proposals are inherently linked to the debate about the nature and purpose of the corporation. We can take a step further to understand how new proxy guidance advanced by the SEC and recent events of shareholder activism spell out the inevitable involvement of the corporation in the construction and representation of democracy.106 It is important to note shareholders’ engagement is likely to increase in the next few years as corporations explore how to take their operations to a metaverse—a word that has been loosely used by prominent CEOs to signify a new and transcendental reality for businesses.107 These changes continue to feed the debate around the purpose of the corporation, challenge instant theories of the corporation that revolve around profit maximization, and may trigger new proxy fights and proxy solicitation issues covered by securities regulation.108 5. Disclosure/Reporting The 1933 Securities Act and the 1934 Securities Exchange Act define the field of securities law.109 The 1933 Act requires companies issuing stock to disclose business and capital structure information. Companies must make disclosures through Form S-1 and a prospectus.110 The 1934 Act requires certain publicly held companies to annually disclose information through Form 10-K and Form 10-Q. The 1934 Act also regulates tender offers and proxy fights. Certain public companies are subject to periodic disclosure requirements.111 There are new frontiers of regulation on the horizon. As of Fall 2021, the SEC’s agenda includes an extensive list of topics related to corporate board diversity, climate change disclosure, human capital management disclosure, cybersecurity risk governance, rules related to investment companies and investment advisers to address matters relating to ESG factors, and the redefinition of record holder for the purpose of the number of shareholders.112 Disclosures under securities laws should include social impact, especially if social purpose is described in the company’s charter.113 However, social impact is difficult to measure.114 This challenge raises questions as to the type of disclosure that should be implemented—voluntary disclosure imposed by a private-sector institution or mandatory disclosure dictated by a state regulatory body. Should there be social impact disclosure rules, it is unclear whether they would cause a change of paradigm in traditional corporations regarding directors’ approach to share value. D. Elements of Social Enterprise and Nonprofit Legal Forms 1. Organization Under National and State Law Reportedly, more than half a million nonprofits, or Internal Revenue Code section 501(c)(3) tax-exempt organizations, have been created in the United States alone since the 2000s.115 Nonprofits qualified under section 501(c) (3) include public charities (or charitable nonprofits) and private foundations, which are exempted from paying federal income tax.116 Nonprofits also include other organizations that meet specified requirements for exemption under other subsections than section 501(c) (3), such as social welfare organizations,117 agricultural or horticultural organizations,118 civic leagues, social clubs, labor organizations,119 and business leagues.120 Nonprofits can make profits but cannot distribute profits to investors as dividends.121 After the Corporate Laws Committee of the American Bar Association (ABA) 2019 proposal to amend the Model Business Corporation Act (MBCA), the 2020 version of the MBCA formally maintained the benefit corporation in the menu of legal forms for businesses.122 In 2020, Delaware also amended its PBC statute. Incorporated in the MBCA, the 2020 ABA Model Legislation is based on the 2017 B Lab Model Legislation and the 2020 Amended Delaware PBC Statute.123 States have not uniformly adopted social enterprise statutory laws. Alabama, Georgia, New Mexico, and Ohio constitute the latest group of states that enacted benefit corporations in 2020.124 Different forms of social enterprise are sub-categories of pre-existing business organizations. Characteristics of limited liability, delegated management, continuity of existence, transmissibility of ownership, protections of members and shareholders’ rights in the L3C, the BLLC, the SPC, and the benefit corporation are the same as their equivalent traditional forms of business organization. There are no significant differences in taxation. A few elements unique to social enterprise and nonprofits must be highlighted regarding formation, management duties, compliance, performance assessment, regulation, certification, filing, disclosure, and reporting. III. LIFE CYCLE A. Legal Steps to Form a Social Enterprise The first step to form a social enterprise is to create an organization under state law.125 The object of the business must be identified in the articles of incorporation or corporation’s charter in a way that clearly spells out the social purpose of the business. This requirement demands board members to think about purpose seriously. Adopting or converting into a social enterprise may be a decision that mature businesses are more apt to make. Nonprofits or charitable organizations applying for exemption from federal income taxation must submit additional application forms. Requirements for the formation of nonprofits and social enterprises including filling timelines and other ancillary steps vary between states. Once social enterprises are formed, they are not subject to auditing on a regular basis. Corporations certified by B Lab (B Corporations or B Corps) can be selected to be audited by B Lab. However, even those audits are not regular. B. Managers and the Decision to Convert into a Social Enterprise Benefit corporations can deviate from the shareholder-centric model that prioritizes shareholder wealth maximization. Defenders of shareholder primacy posit that the social enterprise was created precisely to overcome for-profit organizations’ obvious purpose.126 Benefit directors can legitimately favor the realization of positive profit through relative efficiency over profit maximization.127 They are independent and free to judge their business beyond economics.128 If they feel attracted to this model, existing companies can elect to become social enterprises by amending their organic documents and altering the company’s name to indicate the change of status.129 The amendment requires a two-thirds supermajority vote of all shareholders in several states. In 2020, the Delaware PBC statute was amended to require a simple majority for shareholders’ approval of a conversion. The procedure for filing amendments with the state is identical to any other corporate structure. Additionally, there must be a statement that the company has adopted one of the legal forms available for social enterprise. The conversion of section 501(c)(3) nonprofits to social enterprise may be problematic. Most social enterprises are for-profit despite the social goals they would want to achieve. Depending on the state’s law, the conversion of a nonprofit into a for-profit company may be possible, will often be challenging as nonprofit entities’ assets must be exclusively applied for the purposes for which the nonprofits were created. Tax-exempt organizations must file a Form 990 which discloses obligations to donors, clients, public, and other regulatory agencies and informs them about the change. Social enterprises are stakeholder oriented and act as proxies for board of directors’ risk oversight. Many investors, such as Veeva’s investors, often vote in favor of conversion into one of the legal forms for social enterprise if proposed by the board of directors only. Investors believe that board members will oversee risks more adequately when the conversion becomes a reality. C. Tracking Social Enterprise Impact The market discipline may not always align with the social entrepreneur’s mission.130 Therefore, value creation and social improvement are challenging to measure.131 Despite the challenges, several impact-assessment models evaluate whether social enterprises’ actions meet the goals they established.132 For example, B Lab created the Global Impact Investing Rating System (GIIRS) to measure a benefit corporation’s social and environmental impact. The United Nations Global Compact, the International Labour Organization, and the Organisation for Economic Co-operation and Development (OECD) have entered conventions and provided guidelines and principles to measure organizations’ social impact. The European Commission has created the European Union Eco-Management and Audit Scheme (EMAS) to help organizations assess and improve their environmental impact. The Center for High Impact Philanthropy at the University of Pennsylvania developed the cost-per-impact estimates for several social impact assessment models while the Global Reporting Initiative (GRI) provides standards for sustainability reporting.133 D. Compliance, Third-Party Standards, and the Regulation of Social Enterprise In addition to an annual or biennial report,134 statutes may require that corporations apply a third-party standard to assess compliance and their social and environmental performance.135 The statutory requirements relating to the third-party standard vary between states, but none requires certification by the third-party standard setter or other outside reviewer. Besides statutory requirements outlined in model business legislation and state law, such as periodic statements or reports and third-party standards, there is no specific regulatory agency or regulatory framework for social enterprise. Whether regulatory agencies can effectively enforce social and environmental goals set up by corporations remains open and contentious.136 E. Steps to Cease Operations There must be a clear statement that indicates a willingness to change the social enterprise status. A benefit corporation is subject to the corporation’s legal regime including dissolution and liquidation. The benefit corporation may terminate its status and stop being subject to relevant laws by amending its articles of incorporation to delete the statement that maintains that such business is a benefit corporation.137 The L3C is subject to the same provisions of the state LLC Act including dissolution and liquidation. In Louisiana, a L3C shall state in the articles of organization the business purpose that satisfies and that the L3C is at all times operated to significantly further the accomplishment of one or more charitable or educational purpose within the meaning of section 170(c)(2)(B) of the Internal Revenue Code and would not have been formed but for the entity’s relationship to the accomplishment of charitable or educational purposes.138 If the L3C at any time ceases to satisfy any one of its business purposes, it shall immediately cease to be a L3C. However, the L3C shall continue to exist as an LLC provided it still meets the respective requirements.139 Nonprofits’ boards of directors are responsible for dissolving and liquidating the nonprofit. When most business organizations terminate, board members may have to file a certificate or articles of dissolution within relevant state institutions and notify agencies such as the IRS about the termination.140 IV. STATE AND PRIVATE CERTIFICATIONS FOR SOCIAL ENTERPRISES States may offer certifications for social enterprises, although this is not a generalized practice. The Los Angeles County offers a certification that it develops through a Social Enterprise Preference Program.141 The City of Los Angeles and the City of Santa Monica also offer a Green Business Certification. B Lab offers the B Corp Certification,142 which is similar to other certifications, such as the Rainforest Alliance certification,143 the Leadership in Energy and Environmental Design (LEED) certification,144 and the Fairtrade certification.145 The B Corp certification is a stamp that signals a business is meeting standards of verified performance, accountability, and transparency to achieve the goals embraced by the B Lab community and its object. The certification path depends on several factors, such as the company’s industry, profit, and ownership structure. To achieve certification, companies must demonstrate several aspects such as high social and environmental performance and achieve a B Impact Assessment score of 80 or above and passing the B Lab’s risk review. There are no significant conflicts or tensions between public and private designation for social enterprise. The main advocates of social enterprise have been individuals and private institutions such as nonprofits. Like legislation for other traditional business organizations, social enterprise legislation has been created from the bottom up. V. SUBSIDIES, TAX PREFERENCES, AND OTHER BENEFITS FOR SOCIAL ENTERPRISES AND INVESTORS Currently, social enterprises do not benefit from any special federal tax benefits or tax-exempt status. The forms for social enterprise described above are taxed like traditional forms for business enterprise, depending on the legal form they adopt. Although social enterprises are not covered by specific tax preferences, the concept of “enterprise zones” or “opportunity zones” may give some social enterprises the opportunity to qualify for a tax benefits program. Opportunity zones were introduced by the Tax Cuts and Jobs Act and encourage investments in economically disadvantage and low-income areas.146 The criticism that opportunity zones have generated resonates with the voices that have denounced corporate social responsibility as a disguise to legitimize multinational companies’ actions that turn out to be disadvantageous for the communities they pledge to help.147 Section 501(c)(3) of the Internal Revenue Code determines when nonprofits are tax-exempt. Investors who donate to nonprofits and invest in a charitable cause benefit from tax deductions on their personal income taxes. The same tax advantage is not afforded to social enterprise investors. In addition to a tax-exempt status, nonprofits often qualify for specific government or privately sponsored grants and loans that are not taxable. There are multiple legislative instances in which the government “delegates” the provision of social services to non-governmental entities, such as nonprofits, through procurement of services via contracts. These contracts are an avenue for social enterprises to provide human services like homeless assistance, childcare, skills development, job placement, housing and urban development, and transportation. While procurement contracts may constitute a considerable source of revenue for social enterprises and nonprofits, they often do not tackle constitutional and regulatory challenges that the privatization of human services may raise.148 The United States is missing a consolidated legislative framework for a procurement system to demand and procure social innovation and to provide opportunities to social enterprises offering public services. Currently, social enterprises and nonprofits must be capable of conceptualizing projects, creating, and maintaining appropriate local networks, and managing the respective development team for the projects’ implementation, which is based in their ability to secure funding and overcome market fluctuations. The provision of social services by social enterprises triggers a set of questions related to when provision of certain services, such as prisons, health care, and education, should be awarded to private parties and funded through fiscal revenue.149 An answer to these questions may lie in a consolidated legislative framework like the 2013 Public Services (Social Value) Act in the United Kingdom.150 According to this Act, government may consider how the services it is going to acquire promote social values, pluralism, quality, effectiveness, knowledge, innovation, and overall positive impact on the environment and the polity. VI. PRIVATE CAPITAL, SECURITIES REGULATION, AND THE PROTECTION OF SOCIAL-MINDED INVESTORS Perhaps the most enticing aspect of social enterprises is the ability to create social and environmental benefits. The social enterprise status may render enterprises more attractive to long-term investors due to their triple bottom-line—social, environment, and profits—and perceived accountability and transparency regarding their social purpose. Social enterprise investors may include retail investors, institutional investors (such as investment firms, banks, and funds), and nonprofits when their charitable purpose is not at risk. Nonprofits’ charitable capital is less likely to be at risk if the social enterprise they invest in treats capital as a social return rather than financial return.151 Securities laws do not treat social enterprises, particularly the benefit corporation, differently when the enterprise issues financial instruments, such as stocks and bonds, which constitute “securities.” This means that general reporting obligations and enforcement provisions under securities law can be applicable to social enterprises. However, given that most social enterprises are privately held, they are not subject to the disclosure obligations faced by publicly traded companies. Still, they are subject to the anti-fraud rules governing all securities. Despite the lack of a consolidated regulatory framework for social enterprise, the U.S. government has taken initiatives with regulatory effects. The U.S. Treasury Department’s Program-Related Investments (PRIs), the U.S. Labor Department’s relationship with IRS, and the U.S. Labor Department’s guidance on Economically Targeted Investments (ETIS) by pension funds have provided a regulatory frame to the financing of social enterprise through private capital. ETIs may be a vehicle of community growth and environmental protection, particularly when investors live longer and increasingly care about the environment and the planet on which they live.152 VII. PROSPECTIVE CHANGES IN LAW, THE COVID-19 PUBLIC HEALTH CRISIS, THE AMERICAN RESCUE PLAN AND THE INFRASTRUCTURE INVESTMENT AND JOBS ACT The COVID-19 public-health crisis has created additional hurdles for social enterprises, many of which are typically underfunded or struggle to obtain funding. Recent federal legislation might help mitigate these hurdles. Enacted in March 2021, The American Rescue Plan Act of 2021 (Rescue Plan) maintains the eligibility of certain nonprofits for covered loans, payments, and awards according to the Paycheck Protection Program (PPP) under section 7(a)(36) of the Small Business Act (15 U.S.C. § 636(a)(36)), as amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Title III of Division N of Public Law 116-260).153 The Rescue Plan also affords beneficial tax treatments to commercial undertakings, including partnerships and S Corporations. It provides COVID-19 state and local fiscal recovery funds to allow states, territories, and tribal governments to mitigate the fiscal effects from the COVID-19 public health crisis. These funds are meant to be utilized by city, county, and state governments to help households, small businesses, and nonprofits respond to the negative economic effects of the public health emergency, particularly in the tourism, travel, and hospitality industries. The Infrastructure Investment and Jobs Act went into effect on November 15, 2021.154 This Act oversees funding and tax incentives for nonprofits in the education, energy, environmental, and construction sectors. Particularly, section 100401 sets forth grants to nonprofit organizations that support minority business enterprises through education, grants, or loans, and other similar activities. Furthermore, this Act incentivizes entities using taxpayer-financed federal assistance to give a common-sense procurement preference for materials and products produced by companies and workers in the United States in line with environmental and other regulatory requirements. This legislative framework provides a new space to discuss the purpose and political role of business entities and the promise of social enterprise in the current polarized, sensitive, and fragile socioeconomic and political environment. VIII. CONCLUSIONS Amartya Sen developed the idea of human capabilities as “basic capabilities: a person being able to do certain things. The ability to move about is the relevant one here, but one can consider others, for example, the ability to meet one’s nutritional requirements, the wherewithal to be clothed and sheltered, the power to participate in the social life of the community.”155 The idea of development of human capabilities gains different nuances based on different approaches. The most common approaches mirror the divide between public and private law, which in common law countries like the United States is less prominent. Still, such divide affects our representations of market and government. The divide triggers conflicting understandings of what the nature and purpose of business enterprises should be in the development of human capabilities, the society, and the environment. In this context, Bakan’s remark at the beginning of this Article fundamentally challenges how much good a corporation—a private entity—can do. Social enterprises are business undertakings that aim to generate profit while also benefitting society and the environment. The excursion through their legal regime showed how weak enforcement of certain rules is, particularly those that require managers balance shareholders and other stakeholders’ interests. The weakness of enforcement rules constitutes a paradox that defeats the purpose of social enterprise. The Delaware public benefit corporation illustrates how directors have legal incentives to primarily care about stockholders’ interests even in the setting of a social enterprise. Furthermore, a cohesive system of governance and regulation is missing. The literature has advanced possibilities, some of which are based on instruments already foreseen for traditional business enterprises. These include an annual report provided by the managers. Although useful, such mechanisms transform social enterprise into a byproduct and undermine the social purpose for which these business enterprises were envisioned. The current legal regime does not give managers of social enterprises enough incentives to prioritize the interests of other stakeholders over shareholders’ interests. What is needed is an interdisciplinary approach to social enterprise. Such an approach would allow us to understand the motivations at the individual level that drive social entrepreneurs to explore business opportunities in a certain fashion. The way social entrepreneurs position themselves vis-à-vis their businesses has effects at the organizational and societal levels. To develop a strong system of governance for social enterprise, interdisciplinarity helps design allocative mechanisms for the attribution of decision rights, distribution of resources, and provision of incentives to managers, shareholders, employees, creditors.156 Incentive policies such as certifications do not seem to exponentially increase the self-sufficiency of social enterprise. Large scale empirical data documenting the social impact of social enterprise is scarce. Furthermore, public–private partnerships and the collaboration between different institutions is essential for social enterprises and the nonprofit sector to flourish. Social enterprises face the lack of tax incentives, difficulties in obtaining funding, and social impact-measuring hurdles. This situation calls for a cultural shift that puts human capabilities at the center. It pushes legislatures to create legal frameworks to effectively develop an institutional ecosystem for the advancement of social enterprises as something more than mere byproducts. Current legislative approaches have yet to solve this challenge. I wrote this article as the Henry Plauché Dart Endowed Assistant Professor of Law at Louisiana State University Paul M. Hebert Law Center and Research Fellow, Law & Economics Center at George Mason Antonin Scalia Law School. I accepted a position in the United Nations system to advise on law and development, nonprofit organizations, and sustainability. I thank Dana Brakman, Steven Dean, and Frank Gevurtz for helpful comments. Footnotes † https://doi.org/10.1093/ajcl/avac018 1. Joel Bakan, The New Corporation: How “Good” Corporations are Bad for Democracy, Harvard Law School Forum on Corporate Governance (2021).https://corpgov.law.harvard.edu/2021/09/09/the-new-corporation-how-good-corporations-are-bad-for-democracy/ 2. Business Roundtable Redefines the Purpose of a Corporation to Promote “An Economy that Serves all Americans,” Bus. Roundtable (Aug. 19, 2019), www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans. 3. Research Handbook on Corporate Purpose and Personhood (Elizabeth Pollman & Robert B. Thompson eds., 2021); Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development (Onyeka Osuji, Franklin N. Ngwu & Dima Jamali eds., 2020); Antoinette Handley, Business and Social Crisis in Africa (2020). See also Lécia Vicente, Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development: Business and Social Crisis in Africa, 17 Int’l J.L. in Context 569 (2021) (book review). 4. Oliver Hart, Shareholders Don’t Always Want to Maximize Shareholder Value, ProMarket (Sept. 14, 2020), https://promarket.org/2020/09/14/shareholders-dont-always-want-to-maximize-shareholder-value. 5. Despite the increasing popularity of social enterprise in the last decade, see Howard R. Bowen, Social Responsibilities of the Businessman (1953). 6. Alina S. Ball, Social Enterprise Governance, 18 U. Pa J. Bus. L. 919 (2016); J. Haskell Murray, Beneficial Benefit LLCs, 85 U. Cin. L. Rev. 437 (2017); Elizabeth Schmidt, New Legal Structures for Social Enterprises: Designed for One Role but Playing Another, 43 Vt. L. Rev. 675 (2019); Joan MacLeod Heminway, Lawyering for Social Enterprise, 20 Transactions: Tenn. J. Bus. L. 797 (2019); Alisa E. Plerhoples, Social Enterprise as Commitment: A Roadmap, 48 Wash. U. J.L. & Pol’y 89 (2015); Muhammad Yunus & Karl Weber, Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs (2011). 7. See Handley, supra note 3. 8. Juliana Kaplan, The Psychologist Who Coined the Phrase “Great Resignation” Reveals How He Saw It Coming and Where He Sees It Going. “Who We Are as an Employee and as a Worker Is Very Central to Who We Are,” Insider (Oct. 2, 2021), https://www.businessinsider.com/why-everyone-is-quitting-great-resignation-psychologist-pandemic-rethink-life-2021-10. 9. Larry Fink, Larry Fink’s 2022 Letter to CEOs: The Power of Capitalism, BlackRock, www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter. 10. Adam Sterling, Amelia Miazad & Dickson L. Louie, Veeva Systems: The Journey to Converting to a Public Benefit Corporation, Berkeley L. Exec. Educ. Case Ser. (Jan. 20, 2022), https://executive.law.berkeley.edu/veeva-systems-case-study. 11. Pierre-Henri Conac, Luca Enriques & Martin Gelter, Constraining Dominant Shareholders’ Self-Dealing: The Legal Framework in France, Germany, and Italy, 4 Eur. Company & Fin. L. Rev. 491, 494 (2007). 12. Niels Bosma, Stephen Hill, Aileen Ionescu-Somers, Donna Kelley, Maribel Guerrero & Thomas Schott, Global Entrepreneurship Monitor 2020/2021 Global Report, Global Entrepreneurship Monitor 17 (Mar. 5, 2021), www.gemconsortium.org/report/gem-20202021-global-report. 13. Lauren Feiner, Tech Companies Made Big Pledges To Fight Racism Last Year—Here’s How They’re Doing So Far, cnbc (June 6, 2021), www.cnbc.com/2021/06/06/tech-industry-2020-anti-racism-commitments-progress-check.html. 14. Mark J. Roe, Regulatory Competition in Making Corporate Law in the United States—and its Limits, 21 Oxford Rev. Econ. Pol’y 232 (2005); Avner Greif, Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders, 49 J. Econ. Hist. 857 (1989). 15. Francesca Petrella & Nadine Richez-Battesti, Social Entrepreneur, Social Entrepreneurship and Social Enterprise: Semantics and Controversies, 14 J. Innovation Econ. & Mgmt. 143 (2014); Nia Choi & Satyajit Majumdar, Social Entrepreneurship as an Essentially Contested Concept: Opening a New Avenue for Systemic Future Research, 29 J. Bus. Venturing 363 (2014); Wee-Liang Tan, John Williams & Teck-Meng Tan, Defining the “Social” in “Social Entrepreneurship”: Altruism and Entrepreneurship, 1 Int’l Entrepreneurship Mgmt. J. 353 (2005); J. Gregory Dees, The Meaning of “Social Entrepreneurship,” Duke Fuqua Ctr. for Advancement Soc. Entrepreneurship 1 (May 30, 2001), centers.fuqua.duke.edu/case/wp-content/uploads/sites/7/2015/03/Article_Dees_MeaningofSocialEntrepreneurship_2001.pdf. 16. Janelle A. Kerlin, A Comparative Analysis of the Global Emergence of Social Enterprise, 21 Voluntas 162, 164 (2010). See also Dana B. Reiser, Theorizing Forms for Social Enterprise, 62 Emory L.J. 681, 684 (2013); Ball, supra note 6, at 926–30; Tina Saebi, Nicolai J. Foss & Stefan Linder, Social Entrepreneurship Research: Past Achievements and Future Promises, 45 J. Mgmt. 70, 71–76 (2019). 17. A Working Definition of Social Enterprise, Found. for Int’l Cmty Assistance (Nov. 15, 2019), https://finca.org/blogs/a-working-definition-of-social-enterprise/. 18. Schmidt, supra note 6; Julie Battilana, Anne-Claire Pache, Metin Sengul & Marissa Kimsey, The Dual-Purpose Playbook: What It Takes to Do Well and Do Good at the Same Time, 97 Harv. Bus. Rev. 124 (2019); Saebi, Foss & Linder, supra note 16, at 73 (positing that “many SE articles scrutinize very different phenomena (e.g., CSR in for-profits and fund-raising activities in nonprofits), which complicates the meaningful comparison of findings within the SE literature—in other words, highly heterogeneous phenomena are put under the same conceptual umbrella, although some of them may not belong there”). 19. Kerlin, supra note 16 (exploring the concept of social enterprise around the world, which, depending on the jurisdiction, may also include nonprofits and cooperatives). 20. For a description of forms of social enterprise in United States, see Part II.A. 21. Florian Möslein, Robots in the Boardroom: Artificial Intelligence and Corporate Law, in Research Handbook on the Law of Artificial Intelligence 649 (Woodrow Barfield & Ugo Pagallo eds., 2018). 22. Melody Barnes, Innovation with Crawfish Sauce: What A New Orleans Nonprofit Can Teach the Rest of the Country, White House, President Barack Obama (Oct. 30, 2009, 5:27 PM), https://obamawhitehouse.archives.gov/blog/2009/10/30/innovation-with-crawfish-sauce-what-a-new-orleans-nonprofit-can-teach-rest-country (Café Reconcile, in New Orleans, a city with significant levels of poverty and devasted by multiple natural disasters, works with youth in the area of skills development. This nonprofit was part of the Comunity Solutions Tour—a governmental initiative to promote information and network in the social enterprise and nonprofit sector). 23. Dennis R. Young, Elizabeth A.M. Searing & Cassady V. Brewer, The Social Enterprise Zoo: A Guide for Perplexed Scholars, Entrepreneurs, Philanthropists, Leaders, Investors, and Policymakers (2016); Tan, Williams & Tan, supra note 15, at 361 (dividing social enterprise into several categories—community-based enterprises, socially responsible enterprises, social service industry professionals, and socio-economic or dualistic enterprises); Jacques Defourny & Marthe Nyssens, Fundamentals for an International Typology of Social Enterprise Models, 28 Voluntas 2469, 2475–76 (2017) (categorizing three major “matrices” of the economy that shape social enterprise). 24. Defourny & Nyssens, supra note 23. 25. 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Gov’t Open Data Portal, https://data.oregon.gov/Business/Active-Benefit-Companies/baig-8b9x/data. 32. Status Tool, Soc. Enterprise L. Tracker, https://socentlawtracker.org/#/map. 33. Benefit Corporations, B Lab, https://usca.bcorporation.net/benefit-corporation/. 34. Sarah Stankorb, Where Did Social Enterprise Come From, Anyway?, Good (Mar. 10, 2012), www.good.is/articles/where-did-social-enterprise-come-from-anyway; U.N. Dep’t Econ. & Soc. Aff., World Youth Report: Youth, Social Entrepreneurship and the 2030 Agenda 9–10 (2020), www.un.org/development/desa/youth/world-youth-report/wyr2020.html [hereinafter U.N. World Youth Report] 35. U.N. World Youth Report, supra note 34, at 9. 36. Id. at 9. 37. Muhammad Yunus, Nobel Lecture, Nobel Prize (Dec. 10, 2006), www.nobelprize.org/prizes/peace/2006/yunus/lecture. 38. Kerlin, supra note 16, at 166. 39. Dees, supra note 15. 40. 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Vital Farms, Inc., Registration Statement (Form S-1) (July 9, 2020), www.sec.gov/Archives/edgar/data/1579733/000119312520190455/d841617ds1.htm 46. Elissa Loughman, Benefit Corporation Update: Patagonia Passes B Impact Assessment, Improves Score to 116, Patagonia, www.patagonia.com/stories/benefit-corporation-update-patagonia-passes-b-impact-assessment-improves-score-to-116/story-17871.html. 47. Sterling, Miazad & Louie, supra note 10. 48. Charlotte’s Web Holdings, Inc., B Lab, www.bcorporation.net/en-us/find-a-b-corp/company/charlottes-web-holdings-inc. 49. Amalgamated Bank, B Lab, www.bcorporation.net/en-us/find-a-b-corp/company/amalgamated-bank. 50. Are Any B Corps Publicly Traded?, B Lab, https://bcorporation.net/faq-item/are-any-b-corps-publicly-traded. 51. Model Bus. Corp. Act § 8.30 (1969) (Am. Bar Ass’n, amended 1973). 52. Del. Code. Ann. tit. VIII § 365(a) (2013). 53. Id. § 365(b). 54. Id. § 365(c). 55. Marianne Bertrand, Matilde Bombardini, Raymond Fisman, Brad Hackinen & Francesco Trebbi, Hall of Mirrors: Corporate Philanthropy and Strategic Advocacy, 136 Q.J. Econ. 2413 (2021). 56. Serve America Act, Pub. L. No. 111-13, 123 Stat. 1460, 42 U.S.C. 12501 (2009). https://www.congress.gov/bill/111th-congress/house-bill/1388/text. 57. Jumpstart Our Business Startups Act, Pub. L. No. 112-106, 126 Stat. 306 (2012). https://www.congress.gov/bill/112th-congress/house-bill/3606. 58. Alan J. Abramson & Kara C. Billings, Challenges Facing Social Enterprises in the United States, 10 Nonprofit Pol’y F. (2019). 59. Neil Whoriskey, Milbank Discusses SEC Guidance on Shareholder Proposals and the Way to Regulate Climate Change, Colum. L. Sch. Blue Sky Blog (Nov. 24, 2021), https://clsbluesky.law.columbia.edu/2021/11/24/milbank-discusses-sec-guidance-on-shareholder-proposals-and-the-way-to-regulate-climate-change. 60. U.N. World Youth Report, supra note 34, at 16–18. 61. Id. at 17. See also Dana Brakman Reiser & Steven A. Dean, Financing the Benefit Corporation, 40 Seattle U. L. Rev. 793 (2017); Orly Mazur, Taxing Social Impact Bonds, 20 Fla. Tax Rev. 431 (2017); Lauren Sommer, This Kenyan Family Got Solar Power. High-Level Climate Talks Determine Who Else Will, npr (Nov. 10, 2021), www.npr.org/sections/goatsandsoda/2021/11/10/1052926511/this-kenyan-family-got-solar-power-high-level-climate-talks-determine-who-else-w. 62. Press Release, IIX Found., IIX’s Women’s Livelihood Bond™ Officially Listed on the Singapore Exchange (Aug. 16, 2017), https://iixglobal.com/iixs-womens-livelihood-bond-officially-listed-singapore-exchange. 63. World’s First Listed Gender Lens Impact Investing Security, IIX Women’s Livelihood Bond 1, Matures, The Rockefeller Foundation (Jul. 26, 2021), https://www.rockefellerfoundation.org/news/worlds-first-listed-gender-lens-impact-investing-security-iix-womens-livelihood-bond-1-matures/. 64. U.S. Agency for Int’l Dev., Women’s Livelihood Bond, www.usaid.gov/sites/default/files/documents/1861/FS_Womens_Livelihood_Bond_April2019.pdf. 65. Reiser & Dean, supra note 61. 66. Low-Profit Limited Liability Companies Act, Vt. Stat. Ann. tit. XI, §§ 4161, 4162 and 4163 (2015). 67. Status Tool, Social Enterprise Law Tracker, https://socentlawtracker.org/#/map. 68. Benefit corporations are often misunderstood by Certified B Corporations. Both types of companies are sometimes called “B corps,” and both are for-profit companies. However, benefit corporations shall be distinguished from certified B corporations, which have been certified by an independent nonprofit organization called B Lab. Statutes of the benefit corporation are often based on B Lab’s Model Benefit Corporation Legislation but, features vary across jurisdictions. Marc Gunther, Will Wall Street Embrace B Corps?: Etsy, Laureate and Other B Corps Have an Opportunity to Bring Benefit Coporation Structure to the Public, B the Change (Mar. 31, 2017), https://bthechange.com/will-wall-street-embrace-b-corps-5df5c91c4f4a. 69. See current enterprise legal status of public benefit corporation in Delaware at: Soc. Enterprise L. Tracker, https://socentlawtracker.org/#/bcorps; Del. Code Ann. tit. VIII, §§ 361–368 (2013). Delaware’s Public Benefit Corporation Act deviates from the Model Benefit Corporation Legislation. On June 24, 2015, Gov. Jack Markell signed S.B. 75 into law, which amended sections 362 and 363, relating to the use of the “P.B.C.” designation, voting thresholds, and appraisal rights. On July 16, 2020, the Governor signed H.B. 341 into law, which amended sections 363, 365, and 367, relating to the voting thresholds and appraisal rights, changing the voting threshold from a two-thirds to a majority requirement. 70. Soc. Purpose Corp. Act, Cal. Corp. Code §§ 2500–3503 (2014); An Act Relating to Social Purpose Corporations, Rev. Code Wash. 23B.25.005–150 (2012). 71. Benefit LLC Act, Md. Code Ann., Corps. & Ass’ns §§ 11-4A-1201 to 11-4A-1208 (2013). See also An Act Relating to Benefit Companies, Ore. Rev. Stat. §§ 60.750–60.770 (2014). Oregon uses the expression “benefit companies” and allows traditional for-profit business forms, such as corporations and limited liability companies to adopt the benefit company form. 72. Statutory Public Benefit Limited Partnerships, Subchapter XII of Chapter 17, Title 6 Commerce and Trade of the Delaware Code, § 17–1201., Del. Code Ann. tit. VI, § 17-1202. 73. Schmidt, supra note 6, at 700–10. 74. Off. Soc. Innovation & Civic Participation, Obama White House, https://obamawhitehouse.archives.gov/administration/eop/sicp. 75. U.S. Small Bus. Admin., www.sba.gov. 76. Corp. for Nat’l & Cmty Service, www.grants.gov/learn-grants/grant-making-agencies/corporation-for-national-community-service.html. 77. U.S. Agency for Int’l Dev., www.usaid.gov. 78. Harald Baum, The Rise of the Independent Director in the West: Understanding the Origins of Asia’s Legal Transplants, in Independent Directors in Asia: A Historical, Contextual and Comparative Approach 21 (Dan W. Puchniak, Harald Baum & Luke Nottage eds., 2017); Martin Gelter, The Pension System and the Rise of Shareholder Primacy, 43 Seton Hall L. Rev. 909 (2013). For a different approach, see Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247 (1999). 79. Virginia E. Harper Ho, “Enlightened Shareholder Value”: Corporate Governance Beyond the Shareholder Stakeholder Divide, 36 J. Corp L. 59 (2010); Lynn Stout, The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public (2012). See also Principles of Corporate Governance § 2.01 (“The Objective and Conduct of the Corporation”) (1994): <EXT>(a) Subject to the provisions of Subsection (b) and § 6.02 (Action of Directors That Has the Foreseeable Effect of Blocking Unsolicited Tender Offers), a corporation [§ 1.12] should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain. (b) Even if corporate profit and shareholder gain are not thereby enhanced, the corporation, in the conduct of its business: (1) Is obliged, to the same extent as a natural person, to act within the boundaries set by law; (2) May take into account ethical considerations that are reasonably regarded as appropriate to the responsible conduct of business; and (3) May devote a reasonable amount of resources to public welfare, humanitarian, educational, and philanthropic purposes.</EXT> 80. Joan MacLeod Heminway, Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents, 74 Wash. & Lee L. Rev. 939, 950–56 (2017); Kenneth E. Scott, Agency Costs and Corporate Governance, in The New Palgrave Dictionary of Economics and the Law 26 (Peter Newman ed., 1998); Jonathan R. Macey, Fiduciary Duties as Residual Claims: Obligations to Nonshareholder Constituencies from a Theory of the Firm Perspective, 84 Cornell L. Rev. 1266 (1999). In the jurisprudence, see Kamin v. Am. Express Co., 86 Misc.2d 809, 383 N.Y.S.2d 807, aff’d 54 A.D.2d 654, 387 N.Y.S.2d 993 (1st Dept.1976); Smith v. Van Gorkom, 488 A.2d 858 (Del. Sup. Ct. 1985); Broz v. Cellular Info. Sys. Inc., 673 A.2d 148 (Del. 1996). 81. Guth v. Loft, Inc., 5 A.2d 503, 510–11 (Del.1939) (“[If] there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation’s business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of the corporation, the law will not permit him to seize the opportunity for himself.”). 82. Uniform Limited Liability Company Act § 105(a)(1) (1997, last amended 2013) (“Except as otherwise provided in subsections (c) and (d), the operating agreement governs. . . relations among the members as members and between the members and the limited liability company.”); id. § 105(d)(3)(A)(B)(C): <EXT>(3) If not manifestly unreasonable, the operating agreement may: (A) alter or eliminate the aspects of the duty of loyalty stated in Section 409 (b) and (i); (B) identify specific types or categories of activities that do not violate the duty of loyalty; (C) alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of the law; and (D) alter or eliminate any other fiduciary duty.</EXT> 83. Heminway, supra note 6, at 808; Martin Gelter, Why Do Shareholder Derivative Suits Remain Rare in Continental Europe?, 37 Brook J. Int’l L. 843 (2012). See also Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986) (holding that in a situation of takeover directors can reasonably apply defensive measures such as poison pills and stock buy-back if they consider the offer to the company is too low. Then, directors discharge their duty of good faith if they act following reasonable investigation and adopt measures that constitute a reasonable response to the takeover threat. If directors do not maximize shareholder value under those circumstances, shareholders may sue derivatively for directors’ breach of fiduciary duties toward the corporation and its shareholders.). 84. Lyman P.Q. Johnson, Corporate Officers and the Business Judgement Rule, 60 Bus. L. 439 (2005); Stephen M. Bainbridge, The Business Judgment Rule as Abstention Doctrine, 57 Vand. L. Rev. 83 (2004); Frank A. Gevurtz, The Business Judgment Rule: Meaningless Verbiage or Misguided Notion?, 67 S. Cal. L. Rev. 287 (1994). See also Principles Corp. Governance § 4.01 (1994) (“(c) A director or officer who makes a business judgment in good faith fulfills the duty under this Section if the director or officer: (1) is not interested [§ 1.23] in the subject of the business judgment; (2) is informed with respect to the subject of the business judgment to the extent the director or officer reasonably believes to be appropriate under the circumstances; and (3) rationally believes that the business judgment is in the best interests of the corporation.”). 85. William T. Allen, Reinier Kraakman & Vikramaditya S. Khanna, Commentaries and Cases on the Law of Business Organization (6th ed. 2021); Daniel S. Kleinberger, Examples & Explanations: Agency, Partnerships, and LLCs (5th ed. 2017); Larry E. Ribstein, Jeffrey M. Lipshaw, Elizabeth S. Miller & Joshua P. Fershee, Unincorporated Business Entities (5th ed. 2013); Stephen M. Bainbridge, Bainbridge’s Business Associations: Cases and Materials on Agency, Partnerships, LLCs, and Corporations, (11th ed. 2021). 86. Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda, Mariana Pargendler, Wolf-Georg Ringe & Edward Rock, The Anatomy of Corporate Law: A Comparative and Functional Approach 5–13 (3d ed. 2017). 87. Francisco Reyes & Erik P.M. Vermeulen, Company Law, Lawyers and “Legal” Innovation: Common Law Versus Civil Law, 28 Banking & Fin. L. Rev. 433 (2013); Martin Gelter, Centros, The Freedom of Establishment for Companies, and the Court’s Accidental Vision for Corporate Law, in EU Law Stories: Contextual and Critical Histories of European Jurisprudence 309 (Fernanda Nicola & Bill Davies eds., 2017); Dennis Patterson, Transnational Governance Regimes, in International Legal Positivism in a Post-Modern World 401 (Jörg Kammerhofer & Jean D’Aspremont eds., 2014). 88. Nat’l Conference Comm’rs on Uniform State L., Partnership Act (1997) Enactment Map, Uniform L. Comm’n, www.uniformlaws.org/committees/community-home?CommunityKey=52456941-7883-47a5-91b6-d2f086d0bb44. 89. Am. Bar Ass’n Corp. L. Comm., Model Business Corporation Act Enactment Map, www.americanbar.org/groups/business_law/committees/corplaws. 90. Nat’l Conference Comm’rs on Uniform State L., Limited Liability Company Act, Revised (2006) Enactment Map, Uniform L. Comm’n, www.uniformlaws.org/committees/community-home?CommunityKey=bbea059c-6853-4f45-b69b-7ca2e49cf740. 91. Regarding the corporation, often a distinction is made between the C corporation or S corporation. This is an income tax election that does not create different business forms. 92. Allen, Kraakman & Khanna, supra note 85; Kleinberger, supra note 85; Ribstein, Lipshaw, Miller & Fershee, supra note 85; Bainbridge, supra note 85. See also Business Structures, Internal Revenue Service, www.irs.gov/businesses/small-businesses-self-employed/business-structures. 93. Dodge v. Ford Motor Co., 204 Mich. 459, 170 N.W. 668 (1919). 94. Milton Friedman, A Friedman Doctrine: The Social Responsibility of Business is to Increase its Profits, N.Y. Times (Sept. 13, 1970), https://nyti.ms/3JApr5P. 95. Principles Corp. Governance § 2.01 (1994). 96. Adolf A. Berle, Jr. & Gardiner C. Means, The Modern Corporation and Private Property (1932). 97. Baum, supra note 78; Torsten Spiegel, Independent Directors in Japan–Changing Corporate Governance?, 23 ZjapanR/J. Japan. L. 85 (2018); Sofie Cools, Shareholder Proposals Shaking Up Shareholder Say: A Critical Comparison of the United States and Europe, in Research Handbook in Comparative Corporate Governance 302 (Afra Afsharipour & Martin Gelter eds., 2021). 98. See Part II.C.4 below on voting rights and Part III.B on conversion of traditional business enterprises to social enterprises. 99. Greg Nini, David C. Smith & Amir Sufi, Creditor Control Rights, Corporate Governance, and Firm Value, 25 Rev. Fin. Stud. 1713 (2012). 100. For an analysis of stakeholder rights to management in different jurisdictions, see Matteo Gatti & Chrystin D. Ondersma, Stakeholder Syndrome: Does Stakeholderism Derail Effective Protections for Weaker Constituencies?, 100 N.C. L. Rev. 167 (2021); Gelter, supra note 78; Henry Hansmann & Reinier Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439 (2000); Mihir Naniwadekar & Umakanth Varottil, The Stakeholder Approach Towards Directors’ Duties Under Indian Company Law: A Comparative Analysis, in The Indian Yearbook of Comparative Law 2016 95 (Mahendra Pal Singh ed., 2019); Katharina Pistor, Co-Determination in Germany: A Socio-Political Model with Governance Externalities in Employees and Corporate Governance 163 (Margaret M. Blair & Mark J. Roe eds., 1999); Sayuri A. Shimoda, Time to Retire: Is Lifetime in Japan Still Viable?, 39 Fordham Int’l L.J. 753 (2016); William R. Dill, Public Participation in Corporate Planning—Strategic Management in a Kibitzer’s World, 8 Long Range Planning 57 (1975). 101. Corey Rosen & Michael Quarrey, How Well is Employee Ownership Working, Harv. Bus. Rev. (Sept. 1987), https://hbr.org/1987/09/how-well-is-employee-ownership-working. Regarding ESG, see generally Dana Brakman Reiser & Anne Tucker, Buyer Beware: Variation and Opacity in ESG and ESG Index Funds, 41 Cardozo L. Rev. 1921, 1926 (2020); Max M. Schanzenbach & Robert H. Sitkoff, Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by A Trustee, 72 Stan. L. Rev 381 (2020); Thomas Lee Hazen, Social Issues in the Spotlight: The Increasing Need to Improve Publicly-Held Companies’ CSR and ESG Disclosures, 23 U. Pa. J. Bus. L. 740 (2021); Faith Stevelman & Sarah C. Haan, Boards in Information Governance, 23 U. Pa. J. Bus. L. 179, 180 (2020). 102. Alex Edmans, Response to the Green Paper on Corporate Governance Reform, Axel Edmans (Feb. 16, 2017), https://alexedmans.com/wp-content/uploads/2015/02/Green-Paper-Response-201701216.pdf. 103. Berle & Means, supra note 96. 104. Stephen M. Bainbridge, A Comment on the SEC Shareholder Access Proposal (Univ. Cal. Los Angeles Sch. L., Law & Econ. Res. Paper No. 03-22, 2003), https://ssrn.com/abstract=470121 (opining that despite the SEC’s authority to adopt rule 14a-11, “the costs of the rule on corporations outweigh any likely benefits from greater shareholder democracy.”). See contra Lucian A. Bebchuk, The Case for Shareholder Access to the Ballot, 59 Bus. L. 43 (2003) (opining that shareholders’ access to ballots and the opportunity to indicate their own nominees to the board as a challenge to the incumbent directors’ nominee proposals was a positive step toward shareholder democracy and potentially enhanced shareholder incumbent directors’ accountability). SEC Staff has published a legal bulletin with guidelines for companies and shareholders regarding rule 14a-8 under the Securities Exchange Act of 1934. There, the staff legal bulletin states that “staff will no longer focus on determining the nexus between a policy issue and the company, but will instead focus on the social policy significance of the issue that is the subject of the shareholder proposal. In making this determination, the staff will consider whether the proposal raises issues with a broad societal impact, such that they transcend the ordinary business of the company.” SEC Staff Legal Bulletin No. 14L (CF) (Nov. 3, 2021), www.sec.gov/corpfin/staff-legal-bulletin-14l-shareholder-proposals; Stephen M. Bainbridge, Will the SEC Now Allow Shareholder Proposals on Abstract Political Social and Economic Questions?, ProfessorBainbridge.com (Nov. 27, 2021), www.professorbainbridge.com/professorbainbridgecom/2021/11/will-the-sec-now-allow-shareholder-proposals-on-abstract-political-social-and-economic-questions.html; Lucian A. Bebchuk & Robert J. Jackson, Jr., Corporate Political Speech: Who Decides?, 124 Harv. L. Rev. 83, 113 (2010). 105. Simon Zadek, The Path to Corporate Responsibility, Harv. Bus. Rev. (Dec. 2004), https://hbr.org/2004/12/the-path-to-corporate-responsibility (highlighting Nike’s transformation from “the global poster child for corporate ethical fecklessness” to inspirational tagline corporation—“Just do It”). 106. Michal Barzuza, Quinn Curtis & David H. Webber, The Millennial Corporation (2021), https://scholarship.law.bu.edu/faculty_scholarship/1172/; Joel Bakan, The New Corporation: How “Good” Corporations are Bad for Democracy (2020); Joel Bakan, How Good Corporations Are Bad for Democracy, Harv. L. Sch. F. for Corp. Gov. (Sept. 9, 2021), https://corpgov.law.harvard.edu/2021/09/09/the-new-corporation-how-good-corporations-are-bad-for-democracy. 107. Bill Gates, Reasons for Optimism After a Difficult Year, GatesNotes ch. 5 (Dec. 07, 2021), www.gatesnotes.com/About-Bill-Gates/Year-in-Review-2021; Stephen Jones, Bill Gates Says Most Virtual Meetings Will Move To The Metaverse Within 3 Years, And Workers Will Interact Using VR Headsets And Avatars, Insider (Dec. 10, 2021), www.businessinsider.com/bill-gates-virtual-meetings-metaverse-remote-work-virtual-reality-2021-12; Lécia Vicente, JP Morgan Sued Elon Musk’s Tesla For Breach Of Contract: How Did I Predict It?, Bus. L. Prof. Blog (Nov. 22, 2021), https://lawprofessors.typepad.com/business_law/2021/11/jp-morgan-sued-elon-musks-tesla-for-breach-of-contract-how-did-i-predict-it-l%C3%A9cia-vicente-guest-post.html. 108. Lucian A. Bebchuk & Roberto Tallarita, The Illusory Promise of Stakeholder Governance 107 Cornell L. Rev. 91 (2020); Lucian A. Bebchuk & Roberto Tallarita, Will Corporations Deliver Value to All Stakeholders?, 75 Vand. L. Rev. 1031 (2022); Lucian A. Bebchuk, Kobi Kastiel & Roberto Tallarita, For Whom Corporate Leaders Bargain, 94 S. Cal. L. Rev. 1467 (2021); Leo E. Strine Jr., Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy: A Reply to Professor Rock, 76 Bus. L. 397 (2021); Alex Edmans, Grow the Pie: How Great Companies Deliver Both Purpose and Profit (2020). 109. Securities Act, 48 Stat. 74, 15 U.S.C. §§ 77a-77mm (1933); Securities Exchange Act, 48 Stat. 881, 15 U.S.C. §§ 78a-78kk (1934). See also Frank H. Easterbrook & Daniel R. Fischel, Mandatory Disclosure and the Protection of Investors, 70 Va. L. Rev. 669 (1984). 110. Index to Forms, in 2 EDGAR Filer Manual, version 61, sec. 3 (2022), www.sec.gov/info/edgar/specifications/edgarfm-vol2-v61.pdf; EDGAR Fillings and Forms, sec, www.sec.gov/edgar.shtml. 111. Sarbanes–Oxley Act, Pub. L. No. 107-204 (2002); Dodd–Frank Wall Street Reform & Consumer Protection Act, Pub. L. No. 111-203 (2010); Yuliya Guseva, Destructive Collectivism: Dodd-Frank Coordination and Clearinghouses, 37 Cardozo L. Rev. 1693 (2016); Stephen M. Bainbridge, Dodd–Frank: Quack Federal Corporate Governance Round II, 95 Minn. L. Rev. 1779 (2011); Sanjai Bhagat & Roberta Romano, Reforming Executive Compensation: Focusing and Committing to the Long-Term, 26 Yale J. Reg. 359 (2009); Regulating Wall Street: The Dodd–Frank Act and the New Architecture of Global Finance (Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson & Ingo Walter eds., 2010). Roberta Romano, The Sarbanes-Oxley Act and the Making of Quack Corporate Governance, 114 Yale L.J. (2005). John C. Coffee Jr., Political Economy of Dodd-Frank: Why Financial Reform Tends to be Frustrated and Systemic Risk Perpetuated, 97 Cornell L. Rev. 1019 (2012). 112. Off. Info. & Regul. Aff., Agency Rules List—Fall 2021: Securities and Exchange Commission, Reginfo.gov., available at www.reginfo.gov/public/do/eAgendaMain; Lécia Vicente, Lucia Ruggeri & Kozue Kashiwazaki, Beyond Lipstick and High Heels: Three Tell-Tale Narratives of Female Leadership in the United States, Italy and Japan, 32 Hastings Women’s L.J. 3 (2021); Darren Rosenblum & Yaron Nili, Board Diversity By Term Limits?, 71 Ala. L. Rev. 211 (2019); Elizabeth Demers, Jurian Hendrikse, Philip Joos & Baruch Lev, ESG Didn’t Immunize Stocks During the COVID-19 Crisis, But Investments in Intangible Assets Did, 48 J Bus. Fin. & Accounting 433 (2021); John Armour, Luca Enriques & Thom Wetzer, Mandatory Corporate Climate Disclosures: Now, But How?, 2021 Colum. Bus. L. Rev. 1085 (2022); George S. Georgiev, The Human Capital Management Movement in U.S. Corporate Law, 95 Tul. L. Rev. 639 (2021). 113. See Part III.D (on social enterprise regulatory framework). 114. See Part III.C (on social impact measurement). 115. Nat’l Council Nonprofits, Nonprofit Impact Matters: How America’s Charitable Nonprofits Strengthen Communities and Improve Lives 16 (2019), www.nonprofitimpactmatters.org/site/assets/files/1/nonprofit-impact-matters-sept-2019-1.pdf [hereinafter Nonprofit Impact Matters]. 116. Internal Revenue Service, Life Cycle of a Public Charity Foundation, www.irs.gov/charities-non-profits/charitable-organizations/life-cycle-of-a-public-charity-private-foundation. 117. I.R.C. § 501(c)(4). 118. Id. § 501(c)(5). 119. Id. § 501(c)(5). 120. Id. § 501(c)(6). 121. Nonprofit Impact Matters, supra note 115, at 6 (counting the number of registered section 501(c)(3) nonprofits and private foundations by subsector, based on data collected from IRS Form 990 returns processed for fiscal years ending circa 2016 and released in June 2018). See also Grunin Ctr. for L. & Soc. Entrepreneurship, The State of Social Enterprise and the Law 2020–2021 Report 6, www.law.nyu.edu/centers/grunin-social-entrepreneurship/resources/publications [hereinafter Grunin Ctr. Report] (illustrating the available forms of social enterprise across the United States). 122. Grunin Ctr. Report, supra note 121, at 9. See also Corp. L. Comm., Am. Bar. Ass’n Bus. L. Sec., Benefit Corporation White Paper, 68 Bus. L. 1083 (2013) (explaining the emergence of the benefit corporation as a response to the tension between two models of the corporation—the property model and the entity model. The property model, as described therein, views shareholders as owners and understands the purpose of the corporation as the maximization of shareholders’ value. The entity model perceives the corporation as a legal person that considers the interests of other stakeholders besides shareholders.). 123. See Grunin Ctr. Report, supra note 121, at 10 (comparing elements of each model legislation available in 2020). 124. Grunin Ctr. Report, supra note 121, at 7–8 (compiling the main features of benefit corporations’ statutes enacted in Alabama, Georgia, New Mexico, and Ohio in 2020). 125. See Part II.C. 126. William H. Clark, Jr. et al., The Need and Rationale for the Benefit Corporation: Why Is it the Legal Form That Best Addresses the Needs of Social Entrepreneurs, Investors, and, Ultimately, the Public (Jan. 18, 2013), https://usca.bcorporation.net/benefit-corporation/. See also Shahzad Ansari, Kamal Munir & Tricia Gregg, Impact at the “Bottom of the Pyramid”: The Role of Social Capital in Capability Development and Community Empowerment, 49 J. Mgmt. Stud. 813 (2012). 127. Armen Alchian, Uncertainty, Evolution and Economic Theory, in 1 The Collected Works of Armen A. Alchian: Choice And Cost Under Uncertainty 6 (Daniel K. Benjamin ed., 2006). 128. Model Benefit Corp. Legislation § 102 (Apr. 17, 2017) (setting forth that “[s]erving as a benefit director or benefit officer does not make an individual not independent.”). 129. Del. Code Ann. tit. VIII, §§ 361–68 (2013). 130. Dees, supra note 15, at 3. 131. Abramson & Billings, supra note 58. 132. J. Haskell Murray, Choose Your Own Master: Social Enterprise, Certifications, and Benefit Corporation Statutes, 2 Am. U. Bus. L. Rev. 1 (2012). 133. Cecilia Grieco, Laura Michelini & Gennaro Iasevoli, Measuring Value Creation in Social Enterprises: A Cluster Analysis of Social Impact Assessment Models, 44 Nonprofit & Voluntary Sector Q. 1173 (2015). 134. Del. Code Ann. tit. VIII, § 366 (2013). 135. See, e.g., Model Benefit Corp. Legislation § 401(a) (2017); Del. Code Ann. tit. VIII, § 366 (2013). 136. Robert T. Esposito, Charitable Solicitation Acts: Maslow’s Hammer for Regulating Social Enterprise, 11 N.Y.U. 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Design, www.usgbc.org/about/mission-vision. 145. Fairtrade America, www.fairtradeamerica.org. 146. An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. No. 115-97 (2017). 147. Edward W. De Barbieri, Opportunism Zones, 39 Yale L. & Pol’y Rev. 82 (2020); Hedda Ofoole Knoll & Frederick Ahen, Human Resource Management and Political CSR in Global Supply Chains: Causes and Consequences of Host Communities’ Enduring Struggles, in Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development 98, 110–11 (Onyeka K. Osuji, Franklin N. Ngwu & Dima Jamali eds., 2020). 148. Paul R. Verkuil, Public Law Limitations on Privatization of Government Functions, 84 N.C. L. Rev. 397 (2006); Martha Minow, Public and Private Partnerships: Accounting for the New Religion, 116 Har. L. Rev. 1229 (2003). 149. Often religious organizations provide non-religious services. Albeit the First Amendment to the United States Constitution bars government funding of religion, the government might provide funding to religious organizations to provide non-religious services. 150. Social Value Act: Information and Resources, Gov.uk (March 29, 2021),www.gov.uk/government/publications/social-value-act-information-and-resources/social-value-act-information-and-resources. 151. Antony Bugg-Levine, Bruce Kogut & Nalin Kulatilaka, A New Approach to Funding Social Enterprises, Harv. Bus. Rev. (Jan.–Feb. 2012), https://hbr.org/2012/01/a-new-approach-to-funding-social-enterprises. 152. For a definition of PRIs, see Program-Related Investments, Internal Revenue Service, www.irs.gov/charities-non-profits/private-foundations/program-related-investments. See also New Guidance on Economically Targeted Investments in Retirement Plans from the US Labor Department, U.S. Dep’t Labor (Oct. 22, 2015), www.dol.gov/newsroom/releases/ebsa/ebsa20151022. 153. American Rescue Plan Act, Pub. L. No. 117-2 (2021). 154. Infrastructure Investment and Jobs Act, Pub. L. No. 117-58 (2021). 155. Amartya Sen, Equality of What?, in 1 Tanner Lectures on Human Values 197, 218 (1980). https://www.ophi.org.uk/wp-content/uploads/Sen-1979_Equality-of-What.pdf. 156. Adaeze Okoye, CSR and a Capabilities Approach to Development: CSR Laws as an Allocative Device?, in Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development 31 (Onyeka K. Osuji, Franklin N. Ngwu & Dima Jamali eds., 2020). © The Author(s) [2022]. Published by Oxford University Press on behalf of the American Society of Comparative Law. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/pages/standard-publication-reuse-rights) © The Author(s) [2022]. Published by Oxford University Press on behalf of the American Society of Comparative Law. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.
TI - The Social Enterprise: A New Form of Enterprise?
JF - The American Journal of Comparative Law
DO - 10.1093/ajcl/avac018
DA - 2022-09-23
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SP - i155
EP - i184
VL - 70
IS - Supplement_1
DP - DeepDyve
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