Thursday, October 3, 2013
Professor Haskell Murray is presenting on Delaware's new Public Benefit Corporation Act on October 5th at the Southeastern Law Scholars Conference. Delaware is the 19th state to pass such legislation and given the influence that the state has on others in the area of corporate law, it may prompt the many states that are considering it to pass their own pending legislation. Many question the need for benefit corporations in general given the constituency statutes that are already in place in many states and the debate about the shareholder wealth maximization norm. Others worry about unintended consequences (see here for example).
Haskell has probably written more extensively on these entities than almost anyone else (see here). Although his latest article is not yet on SSRN, the abstract is below. I look forward to reading his article and to seeing how many Delaware corporations jump on the benefit corporation bandwagon.
“Systems should exist to serve society. Right now our capitalist system is not serving society; it’s serving shareholders. And we can’t run around expecting different outcomes until we change the rules of the game.” -Jay Coen Gilbert (Co-founder, B-Lab)
“Delaware, the leading incorporation state, engages in significant, and continual, legal innovation. . . . Delaware is not the only state to be continually revising its corporation code: other states invariably follow suit, revising their codes to follow Delaware’s innovations.” -Roberta Romano (Professor, Yale Law School)
B Lab co-founder Jay Coen Gilbert provided the introductory quote in his 2010 TEDx Talk in Philadelphia on certified B corporations. Since 2010, B Lab has been quite active. Not only has the non-profit organization privately certified over 800 companies, but B Lab has also taken the lead in successfully convincing 19 states and Washington, D.C. to pass benefit corporation statutes: in their words, “changing the rules of the game.” After eighteen months of lobbying and negotiation, B Lab even convinced Delaware, the recognized pacesetter in U.S. corporate law, to amend its corporate statute. Delaware, however, cut its own path in regard to the benefit corporation form. Delaware is quite sensitive to issues involving corporate law and often acts quickly to protect its strong market position. While most of the other states appear to have worked from the Model Benefit Corporation Legislation (the “Model”) and stayed relatively close it, Delaware seems to have merely consulted the Model and created a largely new social enterprise form that Delaware calls a public benefit corporation (“PBC”). This article builds on the author’s previous work on benefit corporations, compares the Model and the PBC amendments, and offers suggestions for improving the law.
This article proceeds in five primary parts. Part I of this article provides a brief overview of benefit corporations, the PBC amendments, and the legal side of the social enterprise movement more generally. Part II claims that the PBC amendments allow more private ordering than does the Model, and argues that most of the PBC provisions providing additional flexibility are positive developments. Part III posits that the PBC provides superior guidance to directors, but also makes suggestions for providing additional clarity. Part IV dissects the branding aspect of both the Model and the PBC, decides that the Model provides for slightly better branding, but opines that the social enterprise branding efforts are best left to the private market. Part V briefly examines remaining governance and ethical challenges facing those associated with PBCs and sets the stage for future research. The article concludes with a summary of the article’s main points and projections related to the future of social enterprise legislation in wake of Delaware’s innovations.”