Purpose Driven Companies in the United States
Alicia E. Plerhoples, Purpose Driven Companies in the United States, in International Handbook of Social Enterprise Law: Benefit Corporations and Other Purpose Driven Companies (Henry Peters, et al., eds., Forthcoming 2022).
18 Pages Posted: 4 Apr 2022
Date Written: March 10, 2022
The United States is the birthplace of benefit corporations precisely because of American society’s over-reliance on the private sector to solve societal problems. U.S. federal and state regulation continuously fails to provide robust social safety nets or prevent ecological disasters. American society looks to companies to do such work. U.S. social enterprise entities attempt to upend the U.S. legal framework which binds fiduciaries to focus on shareholder value. These entities are permitted, and sometimes required, to take into account environmental, social, and governance (“ESG”) impacts of their operations, essentially internalizing ESG costs that would otherwise be paid by American communities and the environment. This chapter traces social enterprise development under U.S. law, starting with a brief discussion of corporate law as a creature of state law. It then provides an overview of the two major types of social enterprise entities in the United States: (1) the Delaware Public Benefit Corporation, and (2) the California Special Purpose Corporation. The chapter briefly discusses other types of U.S. social enterprise entities, including hybrid ventures, worker cooperatives, and the low-profit liability company. The chapter concludes with a discussion of responses to companies’ ESG efforts by legal scholars, asset managers, and the U.S. Securities and Exchange Commission. These responses and the uptake of publicly traded public benefit corporations indicate a seismic shift forward in the use of ESG frameworks in the United States.
Keywords: ESG, social enterprise, capital markets
JEL Classification: K00, K22
Suggested Citation: Suggested Citation