Improving the Benefit Corporation: How Traditional Governance Mechanisms Can Enhance the Innovative New Business Form

In recent years, a number of states have offered innovative new business forms to accommodate social enterprises, organizations that pursue both profit and social purpose. These hybrid forms are designed to free socially conscious entrepreneurs from the strict pursuit of shareholder value maximization that often controls in business practice and law, allowing them instead to serve the interests of other company stakeholders or even society. One form, the benefit corporation, has been adopted by seven states and is now under consideration in several more. This Note details the development, provisions, and advantages of the benefit corporation. It also identifies and analyzes possible flaws in the benefit corporation as it is structured now. In particular, this Note focuses on the potential enforceability and accountability challenges that might accompany the social obligation provisions that are typical of the form. Finally, the Note explores ways in which states might employ traditional corporate governance mechanisms to strengthen the benefit corporation form and better ensure that it effectively serves its dual commitments to shareholders and stakeholders