Benefit Corporations in Education: Bridging the Divide between For-Profit and Nonprofit Colleges and Universities

37 Pages Posted: 12 May 2012

See all articles by Edmund Wilfong

Edmund Wilfong

affiliation not provided to SSRN

Date Written: May 11, 2012

Abstract

Few markets see serious competition between for-profit corporations and nonprofit corporations. The higher education market is just such a rare duck. Up until recently, educational institutions split between nonprofit corporations and for-profit corporations. This has blossomed into serious issues, as the troubles of both for-profit and nonprofit business organizations interfere with social academic needs.

A new business organization may add considerable diversity and utility to the market. The benefit corporation is a new hybrid business model available in seven states. It provides a middle ground between the for-profit and nonprofit corporate organizations. Some laud this middle ground as the perfect solution to the problem of corporate social responsibility, while others decry it as a chimera worthy of Victor Frankenstein.

This article explores the benefit corporation in depth, using the academic market as a concrete foundation for describing the organization. This article demonstrates that the economic equilibrium provided by the benefit corporation is beneficial to students and to the academic world, and has greater stability than that provided by nonprofits or for-profits. It also discusses the issues that exist within the statutes, in particular the lack of power to enforce the beneficial purpose without serious social fallout.

Despite the statutory difficulties, the benefit corporation resolves many of the issues that confront for-profit universities, and a number of the troubles faced by nonprofit universities. The stability provided by diversified funding sources, transparency, and balanced incentives make the benefit corporation a robust choice, provided those who administer it embrace it in its entirety and approach it with a clear and forward-thinking plan.

Keywords: benefit corporations, higher education, law, education, economics, business organizations, universities, for-profit, nonprofit

JEL Classification: A12, H25, H52, I29, K29, L39

Suggested Citation

Wilfong, Edmund, Benefit Corporations in Education: Bridging the Divide between For-Profit and Nonprofit Colleges and Universities (May 11, 2012). Available at SSRN: https://ssrn.com/abstract=2056540 or http://dx.doi.org/10.2139/ssrn.2056540

Edmund Wilfong (Contact Author)

affiliation not provided to SSRN

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