Is There a Role for Benefit Corporations in the New Sustainable Governance Framework?

European Corporate Governance Institute - Law Working Paper No. 588/2021

An edited version of this paper will be published in the Festschrift for Rolf Skog (forthcoming)

40 Pages Posted: 23 Jun 2021

See all articles by Guido Ferrarini

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI); EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law

Shanshan Zhu

University of Genoa - Law School; EUSFIL Jean Monnet Centre of Excellence

Date Written: May 30, 2021

Abstract

In this paper, we ask whether benefit corporations have a role to play in the emerging EU sustainable governance framework. In sec. 2, we briefly introduce the benefit corporation with regard to US law and to the laws of some EU member States, such as France and Italy, which have adopted this company form. In sec. 3, we focus on the benefit corporation’s purpose and function from a comparative law perspective, asking whether benefit corporations perform a useful function internationally. We argue that corporate purpose tends to be a flexible concept across countries and that benefit corporations are not the only way to reconcile profit and social values in business corporations. In sec. 4, we compare the critical features of the law relating to benefit corporations with the essential elements of the emerging sustainable governance framework. We show that the latter partially overlaps with the laws on benefit corporations and to some extent is a substitute for them, therefore reducing the potential interest in this corporate form. In sec. 5, we conclude that mainly firms which the new EU sustainable governance framework does not apply to, such as non-listed SMEs, will adopt the benefit corporation model when available in their jurisdiction, while other companies may still adopt it mostly for communicating their commitment to sustainability.

Keywords: Benefit corporation, corporate purpose, corporate governance, corporate social responsibility, shareholder primacy, shareholder value, shared value, social value, stakeholder governance, sustainability

JEL Classification: G30, G32, G38, K20, K32, L21, M14, P12

Suggested Citation

Ferrarini, Guido and Zhu, Shanshan, Is There a Role for Benefit Corporations in the New Sustainable Governance Framework? (May 30, 2021). European Corporate Governance Institute - Law Working Paper No. 588/2021, An edited version of this paper will be published in the Festschrift for Rolf Skog (forthcoming), Available at SSRN: https://ssrn.com/abstract=3869696 or http://dx.doi.org/10.2139/ssrn.3869696

Guido Ferrarini (Contact Author)

University of Genoa - Law Department and Centre for Law and Finance ( email )

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European Corporate Governance Institute (ECGI)

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1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law

Italy

HOME PAGE: http://www.eusfil.eu

Shanshan Zhu

University of Genoa - Law School ( email )

Via Balbi 22, 6th floor
Genoa, Genoa 16100
Italy

EUSFIL Jean Monnet Centre of Excellence ( email )

Via Balbi
Genoa
Italy

HOME PAGE: http://www.eusfil.eu

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