Why the New Benefit Corporations May Not Prove to Be Truly Socially Beneficial

Business & Professional Ethics Journal, Forthcoming

47 Pages Posted: 18 Aug 2015

Date Written: July 30, 2015

Abstract

The financial meltdown of 2007 and the subsequent Great Recession have led many people to believe that corporations are on the wrong track. Instead of pursuing primarily shareholder value, corporations should, the argument goes, strive to contribute to the public welfare. This point of view has served to fuel interest in a relatively new type of corporations -- social enterprises. Indeed, some commentators have argued that we are now “in the midst of a historical movement in which some of the core ideas of business, and of the law that governs it, are being reconsidered” (Greenfield, 2014,1). This social enterprises movement aims at “overturning the hegemony of shareholder value” (Nocera, 2012, A19).

Social enterprises may take a variety of legal forms (limited liability companies, nonprofit entities, etc.). This paper focuses primarily upon one particular new form increasingly popular within the United States -- the “benefit corporation.” I evaluate whether U.S. benefit corporations are likely to realize as much social benefit as is frequently claimed. Part One of the paper describes the features of benefit corporations as they are constituted in many states. Part Two lays out the benefits being extolled by supporters of this U.S. legal corporate form. Part Three challenges these claims and adduces reasons for doubting whether benefit corporations will prove to be as socially useful as they claim to be. Part Four concludes with some suggestions for future lines of research into the nature of the firm and benefit corporations in particular.

Keywords: benefit corporations, social enterprise

Suggested Citation

Koehn, Daryl, Why the New Benefit Corporations May Not Prove to Be Truly Socially Beneficial (July 30, 2015). Business & Professional Ethics Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2638084

Daryl Koehn (Contact Author)

DePaul University ( email )

Driehaus College of Commerce
1 East Jackson Blvd.
Chicago, IL 60604
United States

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