Benefit Corporations and Strategic Action Fields or (the Existential Failing of Delaware)

36 Pages Posted: 18 Sep 2015

See all articles by Brett McDonnell

Brett McDonnell

University of Minnesota Law School

Date Written: September 18, 2015

Abstract

This paper analyzes the creation and growth of benefit corporations from the perspective of strategic action field theory, in an attempt to shed some light upon both the subject and the methodology. It considers how the new legal field of benefit corporations responded to weaknesses in the existing fields of business corporations and non-profit corporations. Where major field participants such as directors, officers, employees, and shareholders or donors wish to pursue both financial and public-spirited goals that sometimes conflict without subordinating either type of goal to the other, both profit and non-profit corporations may be unsatisfactory. Benefit corporations attempt not only to allow entrepreneurs to seek goals other than profits, but also to commit to doing so while also making profits, so as to entice outside investors and employees to become involved.

In explaining how the new legal form arose out of the gap created by these weaknesses, the paper stresses the role of B Lab as what strategic action field theory calls an internal governance unit, both internally regulating the field and acting as an external champion through creating and lobbying for model benefit corporation legislation. This has so far succeeded in passing legislation in over half of the states, with around 2,000 companies adopting benefit corporation status as of this writing. The paper considers the possibility of successful further emergence of this field through widespread adoption, considering the role that B Lab, social networks and organization, transactional lawyers, and courts could play in responding to many major identified challenges. The paper concludes with some reflections about what this application has taught the author about the strengths and weaknesses of strategic action field theory. A focus on the social and endogenous nature of preferences, and on a mix of selfishness with a search for meaning and connection as motivating forces, are clearly improvements on the conceptual apparatus of the dominant corporate law paradigm, law and economics. However, it remains to be seen whether the theory provides strong and articulated enough methodological and normative tools to pose a strong challenge to that dominant paradigm.

Keywords: benefit corporations, strategic action fields, nonprofit corporations

JEL Classification: D21, G30, K22, L21, M14

Suggested Citation

McDonnell, Brett H., Benefit Corporations and Strategic Action Fields or (the Existential Failing of Delaware) (September 18, 2015). Seattle University Law Review, Vol. 39, January 2016 (Forthcoming), Minnesota Legal Studies Research Paper No. 15-29, Available at SSRN: https://ssrn.com/abstract=2662532

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-1373 (Phone)

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