Social Enterprise: Who Needs it?
Brian D. Galle
Georgetown University Law Center
July 29, 2013
Boston College Law Review, Vol. 54, 2013
Boston College Law School Legal Studies Research Paper No. 305
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.
Number of Pages in PDF File: 19
Keywords: social enterprise, B corporation, L3C, for-profit charity, nonprofit, transaction cost economics
Date posted: July 30, 2013 ; Last revised: February 11, 2014