Benefit Corporations: How to Enforce a Mandate to Promote the Public Interest

 

By: Briana Cummings

 

A new trend has emerged within the past decade: corporations that seek to turn a profit while affirmatively promoting the public interest. To accommodate this trend, six states have recently enacted legislation creating the benefit corporation, a for-profit entity that is legally obligated to promote both a “specific public benefit” of its choosing and the “general public benefit.” Of all the legal and practical challenges facing successful implementation of this new legislation, perhaps the trickiest—and most important—is the need to ensure accountability to this public purpose mandate. This Note argues that the principal components of the accountability scheme adopted by benefit corporation legislation—(1) certification from an independent third party and (2) annual reports to the public—are ill-suited to the regulation of social welfare objectives. Drawing on lessons learned from the use of similar top-down regulatory mechanisms in corporate, nonprofit, and government contexts, this Note explains why the addition of bottom-up and horizontal mechanisms for “mission accountability” may help foster the capacity and internal motivation necessary for benefit corporations to achieve their public benefit obligations.

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