Can an Old Dog Learn New Tricks? Applying Traditional Corporate Law Principles to New Social Enterprise Legislation

摘要

Seven U.S. states have recently adopted the benefit corporation or the flexible purpose corporation—two novel corporate forms intended to house social enterprises, i.e., those ventures that pursue social and environmental missions along with profits. And yet, these corporate forms are not viable or sustainable if they do not attract social entrepreneurs or social investors due to the lack of understanding and inquiry into how traditional corporate law principles will be applied to them. This article begins this necessary examination. As a first approach, this article assesses shareholder primacy and the shareholder wealth maximization norm in the context of the sale of an early-stage flexible purpose corporation. As the market for products and services produced by social enterprises grows, traditional “profit-maximizing” corporations, which may have given limited attention to their social or environmental outputs in the past, want a piece of this market share and can make a rapid market entrance by acquiring an established social enterprise. Using the lens of a corporate acquisition, this article argues that the shareholder wealth maximization norm must be rejected for flexible purpose corporations given the statute’s legislative history and a contractarian view of shareholder primacy where shareholders’ interests are both economic and non-economic. Nonetheless, rejection of the norm leaves a gap in directors’ accountability to shareholders. This article examines alternative accountability mechanisms, including employing a heightened standard of review to the sale of flexible purpose corporations.