An Early Report on Benefit Reports

Abstract

Benefit corporation proponents argue that the new social enterprise entity form “meets higher standards of corporate purpose, accountability, and transparency.” This Article analyzes the transparency claim by examining hand-collected benefit report data and the substantive statutory reporting requirements. Data from early benefit corporations shows an abysmal benefit report compliance rate (below ten percent), drawing into question the claims about heightened transparency. This Article also provides reasons to doubt the efficacy of the current substantive reporting requirements due to the lack of specificity and lack of effective enforcement mechanisms in most states’ benefit corporation statutes. This Article explains how policy, theory, and now early data, all point to significant deficiencies in the benefit reporting framework. Finally, this Article concludes with suggestions to strengthen the benefit corporation reporting requirements, increase compliance rates, and encourage benefit corporation transparency.

Keywords: social enterprise, social entrepreneurship, benefit corporations, benefit reports, B Lab, third-party standards

JEL Classification: K20, K22, M13, M14