Why Public Benefit Corporations?

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Citation: Michael B. Dorff (2016/10/06) Why Public Benefit Corporations?. Delaware Journal of Corporate Law (RSS)
Internet Archive Scholar (search for fulltext): Why Public Benefit Corporations?
Download: https://ssrn.com/abstract=2848617
Tagged: non profit (RSS), benefit corporation (RSS), delaware (RSS)

Summary

Identifies through interviews with people involved in drafting, 2 goals for Delaware's PBC statute, primarily (1) to offer entrepreneurs a business form they desire and secondarily (2) to assist them in helping the broader society.

Also conducted qualitative interviews with executives at 25 benefit corporations (not only in Delaware) to identify which of 8 things these people want to accomplish via business form.

Pecuniary: - Brand (signal dual purpose to customers, employees, investors) - Earn (profits to owners, unlike non-profit form) - Simplify (simpler than running a non-profit) - Manage (push managers to adopt prosocial policies that also improve profitability) - Keep (protect against hostile acquisitions)

Idealistic: - Express (show ideals and inspire others) - Protect (shield from liability if prosocial policies could reduce earnings) - Endure (help firm retain values after founders lose control)

Express cited by "vast majority" of executives, Brand by over half, Protect by nearly half. Non-profit form is an alternative for some: 1/6th included Simplify goal, and smaller numbers cited problems with non-profit sustainability or governance.

However it was the social mission of business that executives said helped these goals, as benefit corporations are not yet widely known or understood.

Consider whether Delaware's PBC statute meet's the state's 2 goals. First, what entrepreneurs want: the statute weakly supports Brand, Express, and Protect, but private ordering (eg commitment to public reporting, 3rd part evaluation) could strengthen. Second, foster social good: ineffective enforcement, but possibly a good reinforcement tool -- fostering discussion and practice of social good by companies.