Friday, March 20, 2015

Etsy's Dilemma

Etsy

The biggest recent news in the social enterprise world is that certified B corporation Etsy is going public.

Despite confusing press releases, Etsy is not legally formed as a benefit corporation, they are only certified by B Lab. (In one of the coolest comments I have received blogging, an Etsy representative admitted that they confused the "benefit corporation" and "certified B corporation" terms and corrected their public statements). If you are new to social enterprise, the differences between a "certified B corporation" and a "benefit corporation" are explained here.  

Etsy, however, will face a dilemma as noted in this article sent to me by Alicia Plerhoples (Georgetown). The B Lab terms for certified B corporations require Etsy to convert to a public benefit corporation (Delaware's version of the benefit corporation) within four years of the Delaware law becoming effective. Delaware's public benefit corporation law went effective August 1, 2013.

So, unless B Lab changes its terms, Etsy will lose its certified B corporation status if it does not convert to a public benefit corporation on or before August 1, 2017.

Given that converting to a public benefit corporation while publicly-traded would be extremely difficult--obtaining the necessary vote (currently 90% in Delaware, with a proposal being considered to move it back to the more typical 2/3), paying dissenters' rights, etc.--I imagine Etsy will need to make this decision before it goes public. Perhaps, Etsy will postpone the decision, and hope that they can just quietly lose their certification in 2017 or that B Lab will make an exception for them. Etsy's CEO is on record promising social responsibility, but we will see whether that promise includes maintaining B Lab certification and making a legal entity change.  

Currently, I am not aware of any publicly-traded benefit corporations, though Delaware public benefit corporation Plum Organics is a subsidiary of publicly-traded Campbell Soup Company.

Many interesting issues would stem from a publicly-traded benefit corporation; I have added a number of items to my article ideas list this morning.

This Etsy story is one I hope to follow, so stay tuned.

 

http://lawprofessors.typepad.com/business_law/2015/03/etsys-dilemma-.html

Business Associations, Corporate Governance, Delaware, Haskell Murray, Social Enterprise | Permalink

Comments

Of interest? http://www.bloomberg.com/news/articles/2015-04-02/etsy-s-ipo-is-a-direct-challenge-to-wall-street-s-beliefs

Posted by: Ann Lipton | Apr 2, 2015 12:15:20 PM

Thanks, Ann!

Posted by: Haskell Murray | Apr 6, 2015 1:26:58 PM

Post a comment