Benefit Corporations: Novelty, Niche, or Revolution

36 Pages Posted: 4 Mar 2014

See all articles by Matthew Clemente

Matthew Clemente

Syracuse University - College of Law

Date Written: March 7, 2013

Abstract

In recent years, social entrepreneurs have begun to do something remarkable. Rather than pursue purely profit — like a traditional corporation — or pursue purely the public good — like a tradition nonprofit, social entrepreneurs have begun to do both. In response to increased market demand, several states have created new hybrid corporate forms to streamline these social enterprises. The rhetoric surrounding the emergence of social enterprise tends to be hyperbolic. Some see social enterprise as a potential panacea to the ills and excesses of corporations. Others view it as a potentially dangerous fad. This Note explores social enterprise and benefit corporations, currently the most popular form of social enterprise.

Part I focuses on the social enterprise movement more generally. After exploring the role of social enterprise in the market, Part I turns to the shortcoming of traditional forms. There, it is shown that the traditional nonprofit-for-profit paradigm is ill suited for the needs of social entrepreneurs. Market participants — consumers, investors, entrepreneurs, and employers — all increasingly demand entities that pursue both profit and the social good. Although companies often purport to be concerned with the social and environmental issues, it is difficult for these groups to tell a good company from good marketing. Finally, Part I concludes by hypothesizing about the ideal social enterprise.

Part II focuses on the benefit corporation, evaluating whether benefit corporations represent a niche, novelty, or revolution. It assesses benefit corporations against three criteria, how they compare to existing law, low-profit limited liability corporations (an alternative hybrid legal form), and the ideal social enterprise. In doing so, Part II considers the two main criticism of benefit corporations — that they are neither necessary nor sufficient to establishing a sustainable social enterprise. Ultimately, this Note concludes that benefit corporations are neither a revolution nor a novelty. Instead, they currently represent a growing niche in the market — one that deserves cautious optimism.

Keywords: Social Entrepreneurship, Social Enterprise, Benefit Corporations, Greyston Baker

Suggested Citation

Clemente, Matthew, Benefit Corporations: Novelty, Niche, or Revolution (March 7, 2013). Available at SSRN: https://ssrn.com/abstract=2359226 or http://dx.doi.org/10.2139/ssrn.2359226

Matthew Clemente (Contact Author)

Syracuse University - College of Law ( email )

Syracuse, NY 13244-1030
United States

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