Corporate Form and Social Entrepreneurship: A Status Report from California (and Beyond)

Abstract

In January 2012, amendments to California’s corporate code permitted a new type of corporate form designed around for-profit entities also wishing to commit to serving a broader “social purpose” (or purposes). Although not the first state to embrace such reforms, California’s experiment is unique, in that it allowed companies to opt for one of two different social benefit entity forms: the “Benefit Corporation” (BC) and the “Flexible Purpose Corporation” (FPC). This essay summarizes the reforms and presents basic descriptive data about the rate at which business organizations have embraced them. Thus far, both forms have had relatively modest take-up rates; those social enterprises that have opted for one of the two forms have generally favored the BC over the FPC, though its market share narrowed consistently during 2012. Although it is premature to conclude whether social enterprise statutes will prove successful, I argue that now is an ideal time to put the infrastructure into place for collecting, organizing and analyzing data in this arena as it becomes available.

Keywords: social entrepreneurship, corporate form, corporate social responsibility, shareholder primacy

JEL Classification: K12, K22