Social Enterprise Governance

Abstract

The social enterprise movement has ushered in a promising new wave of companies using market-based strategies to advance social and environmental change. The longevity and growth of social enterprises will be determined by their ability to balance the complex and often competing interests within these unique business entities. The established corporate governance regime, which predominately addresses the characteristics of public companies, does not provide adequate oversight for promoting good corporate governance within the social enterprise sector. This Article argues that the benefit reporting requirements in hybrid-corporation statutes offer an innovative mechanism for encouraging and maintaining good social enterprise governance. Using the benefit reporting requirements within hybrid-corporation statutes as a model, this Article provides a normative framework and establishes the implementation principles for social enterprise governance across various legal entities. By counseling social enterprises on how to promote participatory democracy and increase the company’s capacity to detect and address problems, corporate lawyers serve a critical function in developing social enterprise governance. Using an approach guided by corporate lawyers and informed by social enterprise practitioners would build on the traditional corporate governance paradigm to develop narrowly tailored mechanisms that facilitate a more resilient social enterprise sector.

Keywords: corporate governance, social enterprise, benefit corporation, benefit reporting, new governance theory