Benefit Corporations and Public Markets: First Experiments and Next Steps

Abstract

This paper explores corporate governance challenges that will arise as benefit corporations, and social enterprise more generally, go public. Balancing accountability of managers with a firm commitment to both doing good and making money may prove particularly difficult in the context of firms with shares traded on public markets. This paper looks at early experiments in both public markets and individual companies. It considers various corporate governance mechanisms that may help social enterprises credibly commit to their dual missions. These mechanisms include disclosure, fiduciary duty, board representation, voting, and corporate gatekeepers. Exchanges specifically for social enterprises may play a useful role in facilitating the effective use of these governance mechanisms.

Keywords: Benefit corporation, public markets, corporate law, social enterprise

JEL Classification: D21, G30, K22, L21