Rising to Their Full Potential: How a Uniform Disclosure Regime Will Empower Benefit Corporations

53 Pages Posted: 27 Jun 2018

See all articles by Brent J. Horton

Brent J. Horton

Fordham University - Gabelli School of Business

Date Written: June 13, 2018


Fortunately — perhaps more than at any other time in history — there are investors willing to accept a reduced financial return, as long as they also get the “warm glow” that comes from doing good. And these ready investors are growing in number.

The benefit corporation — a hybrid business organization between a nonprofit corporation and a for-profit corporation — is positioned to accept those investment dollars, and use them to pursue good, whether helping the homeless like ArtLifting, PBC, or helping the environment like Patagonia, Inc.

Unfortunately, benefit corporations are being held back by one serious flaw: a patchwork of unworkable disclosure rules. The existing rules fail to inform investors what their financial and social return will be (and thus have the perverse impact of discouraging investment by socially conscious investors), and likewise fail to inform the broader public whether the corporation is living up to its stated benefit purpose.

This Article proposes a uniform disclosure regime that will apply to all benefit corporations. The proposed regime standardizes disclosure, and thus allows stakeholders (both investors and the broader public) to compare and contrast competing firms. Further, the proposed regime has an enforcement mechanism that would allow both investors and the broader public to ensure that benefit corporations are providing the required disclosure.

Finally, the proposed regime is narrowly tailored to avoid overly burdening the growth of benefit corporations, many of which have limited resources. In fact, this regime may actually save benefit corporations time and money, because it replaces the current patchwork (often chaotic) of state-by-state disclosure requirements with a single, simple regime.

As the title of this Article suggests, the proposed uniform disclosure regime will help benefit corporations rise to their full potential.

Keywords: Benefit Corporations, Social Enterprise, Securities Act, Greenwashing, Financial Disclosures, Social Disclosures, Third-Party Standard, Benefit Report

JEL Classification: K22, K20

Suggested Citation

Horton, Brent J., Rising to Their Full Potential: How a Uniform Disclosure Regime Will Empower Benefit Corporations (June 13, 2018). Harvard Business Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3195453

Brent J. Horton (Contact Author)

Fordham University - Gabelli School of Business ( email )

464 Faber Hall
Bronx, NY 10458
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics