Does Social Enterprise Law Matter?
Joseph W. Yockey
University of Iowa College of Law
February 1, 2014
Alabama Law Review, Forthcoming
U Iowa Legal Studies Research Paper No. 14-06
Social enterprise laws are sweeping through the nation. Entrepreneurs can now organize under one of several new legal forms, including the “benefit corporation” form. In theory, these options will make it easier for socially minded firms to pursue a double bottom line of profit and public benefit — that is, to do well while doing good.
This Article tests that theory. In asking whether social enterprise laws matter, I find that the answer is “yes,” but not for the reasons most people think. The standard rationale for social enterprise laws is that they free managers from the “duty” to put profits ahead of social objectives. But that idea misses the point; existing corporate law is already flexible enough to permit most social/economic tradeoffs. Instead, I argue that social enterprise laws add value by creating a new institutional structure that will motivate the development of self-regulatory standards and provide a helpful coordinating mechanism for legal advisors and pro-social investors. The Article thus offers a unique way of thinking about social enterprise laws. Rather than simply provide new off-the-rack legal forms, these laws encourage a process of norm creation and private engagement that ought to drive the social enterprise movement forward. I conclude by offering firms and lawmakers several strategies to reinforce this dynamic.
Number of Pages in PDF File: 52
Keywords: Social enterprise, Benefit corporation, Social entrepeneurship, Corporate governance, Corporate social responsibility, CSR, New governance, Self-regulation
Date posted: February 2, 2014 ; Last revised: March 13, 2014