Social Enterprise: Who Needs it?

19 Pages Posted: 30 Jul 2013 Last revised: 11 Feb 2014

Brian D. Galle

Georgetown University Law Center

Date Written: July 29, 2013

Abstract

State statutes authorizing firms to pursue mixtures of profitable and socially-beneficial goals have proliferated in the past five years. In this invited response essay, I argue that for one large class of charitable goals the so-called “social enterprise” firm is often privately wasteful. While the hybrid form is a bit more sensible for firms that combine profit with simple, easily monitored social benefits, existing laws fail to protect stakeholders against opportunistic conversion of the firm to pure profit-seeking. Given these failings, I suggest that social enterprise’s legislative popularity can best be traced to a race to the bottom among states competing to siphon away federal tax dollars for local businesses. Not all hybrid forms inevitably are failures, however. For example, the convertible debt instruments proposed by Brakman Reiser and Dean -- the inspiration for this response -- offer a promising route forward for “cold glow” firms wishing to promise to clean up some easily-measured but harmful business practices.

Keywords: social enterprise, B corporation, L3C, for-profit charity, nonprofit, transaction cost economics

Suggested Citation

Galle, Brian D., Social Enterprise: Who Needs it? (July 29, 2013). Boston College Law Review, Vol. 54, 2013; Boston College Law School Legal Studies Research Paper No. 305. Available at SSRN: https://ssrn.com/abstract=2302658

Brian D. Galle (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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