LAW AND SOCIAL ENTREPRENEURSHIP

SOCIAL ENTERPRISE SYMPOSIUM | MARCH 1, 2013 | UNIVERSITY OF MARYLAND

Here is a symposium on social enterprise hosted by the Center of Social Value Creation at University of Maryland’s School of Business: http://www.rhsmith.umd.edu/ses/. No information as to speakers or content yet but this is probably one to keep your eye on given past conferences and the work that has come out of the Center, including www.changetheworld.org that it runs with Grassroots.org.

L3C & THE ARTS VIDEO ONLINE

A few weeks ago, we mentioned the L3C & the Arts event.

Recently, a video of the event was posted online and is available here.

“VIRTUE INC.” IN THE BOSTON GLOBE

Yesterday, The Boston Globe published an article on benefit corporations by Ben Schreckinger entitled “Virtue Inc.”  Read the entire article for yourself, but I just wanted to point out two things about the article.

First, Boston College Law School Professor Kent Greenfield provides quotes near the end of the article.  This was interesting to me because the quotes show that benefit corporations are starting to get the attention of some of the top thinkers in the legal academy.  (Professor Greenfield is the author of The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities, among other works).

Second, Professor Greenfield expressed concern that “opt-in solutions like benefit corporations risk diverting momentum from bigger reform efforts that could affect the way all corporations do business.”  While there has definitely been a fair bit of change brought on by the broader corporate social responsibility movement over the past few decades, much of that change appears to be fairly surface level, at least in the United States.  It still remains to be seen whether benefit corporations will be more successful in making large-scale and core changes in what Professor Greenfield refers to as the harmful “narrow focus on shareholder interest.”

THE FUTURE OF SOCIAL ENTREPRENEURSHIP: DAVID BORNSTEIN AND BILL DRAYTON | NOVEMBER 29, 2012 | NEW YORK

On November 29th, Ashoka’s founder Bill Drayton will discuss the future of social entrepreneurship in an interview with David Bornstein from the New York Times. Event takes place at LiquidNet in New York. Tickets to the event and more info here. I wish that I was able to attend in person but I will be sure to follow along on Twitter using #FutureSocEnt.

2012 SEC FORUM ON SMALL BUSINESS CAPITAL FORMATION │ 11/15 │ WASHINGTON D.C.

While only tangentially related to social enterprise law, I thought some of our readers might be interested in the 2012 SEC Government-Business Forum on Small Business Capital Formation.  Many social enterprises are small businesses, and most social enterprises are, obviously, interested in capital formation.   

The SEC website describes the program as: “includ[ing] two morning panel discussions. The first panel will focus on JOBS Act implementation and the second panel will focus on small business capital formation issues not addressed by the JOBS Act. In the afternoon, breakout groups will develop recommendations on a variety of issues related to small business capital formation.”

The speakers include the SEC Commissioners, various leading practitioners, and one academic with an extremely impressive CV (Professor Robert Barlett of UC Berkeley School of Law).

The program lasts from 9:00 a.m. until 5:00 p.m. and finishes with a networking receptions.

You can pre-register here.

GEORGETOWN LAW GRADUATE TEACHING FELLOWSHIP IN SOCIAL ENTERPRISE AND NONPROFIT LAW CLINIC

The Social Enterprise and Nonprofit Law Clinic at Georgetown University Law Center is seeking a Graduate Teaching Fellow.

Description of the Clinic

The Social Enterprise and Nonprofit Law Clinic at Georgetown University Law Center will open in Fall 2013. The Clinic introduces and orients law students to the materials, expectations, interactions, and vocabulary of corporate law practice while also challenging students to reflect on and innovate legal reforms that further nonprofit law and the social enterprise movement. The Clinic embraces a focused and explicit use of clinical education to enhance law students’ commitment to laws and business practices that promote triple-bottom line corporate sustainability, which in its most expansive meaning includes financial and environmental sustainability as well as the physical, psychological, and social well-being of individuals and communities.

In the Clinic, law students learn about corporate governance and contexts, shareholders and stakeholders, business relationships and operations, and business documents. Students are taught how to become partners in enterprise for their clients with the understanding that innovative business lawyers understand both the legal and non-legal incentive structures that drive business organizations.

The Clinic’s clients consist of (1) social enterprises, i.e., nonprofits and select for-profit small businesses that employ innovative business strategies with the primary mission of accomplishing social and environmental goals, and (2) nonprofit organizations and foundations working in a wide range of fields including social services, education, youth development, technology, health, sustainable agriculture, and civil rights.

Description of Fellowship

The two-year fellowship is an ideal position for a transactional lawyer interested in developing teaching and supervisory abilities in a setting that emphasizes a dual commitment—clinical education of law students and the promotion of triple-bottom line corporate sustainability. The fellow will have several areas of responsibility, with an increasing role as the fellowship progresses. Over the course of the fellowship, the fellow will: (i) supervise students in representing nonprofit organizations and social enterprises on transactional, operational, and corporate governance matters, (ii) share responsibility for teaching seminar sessions, and (iii) share in the administrative and case handling responsibilities of the Clinic. Fellows also participate in a clinical pedagogy seminar and other activities designed to support an interest in clinical teaching and legal education. The fellowship start date is July 1, 2013, and the fellowship is for two years, ending June 30, 2015.

Qualifications

Applicants must have at least 3 years of post J.D. legal experience. Preference will be given to applicants with experience in a transactional area of practice such as nonprofit law and tax, corporate law, intellectual property, real estate, or finance. Applicants with a strong commitment to economic justice and corporate sustainability are encouraged to apply. Applicants must be admitted or willing to be admitted to the District of Columbia Bar.

Application Process

To apply, send a resume, an official or unofficial law school transcript, C.V., and a detailed letter of interest by December 1, 2012. The letter should be no longer than two pages and address a) why you are interested in this fellowship; b) what you can contribute to the Clinic; c) your experience with transactional matters and/or corporate law; and d) anything else that you consider pertinent. Please address your application to Professor Alicia Plerhoples, Georgetown Law, 600 New Jersey Ave., NW, Suite 434, Washington, D.C. 20001, or electronically to socialenterprise@law.georgetown.edu.

Teaching fellows receive an annual stipend of approximately $53,500 (taxable), health and dental benefits, and all tuition and fees in the LL.M. program. As full-time students, teaching fellows qualify for deferment of their student loans. In addition, teaching fellows may be eligible for loan repayment assistance from their law schools.

Social Enterprise Business Models

As I have noted in other work, the social enterprise spectrum theoretically lies between two extremes. On one end of the spectrum are organizations that pursue social and environmental missions and eschew profit motives, as some nonprofit organizations do. On the other end of the spectrum are organizations that focus solely on profit-maximization and disregard social and environmental missions—these are often called profit-maximizing businesses. I think that mainstream media ungraciously labels all businesses between these two extremes as social enterprise and fails to acknowledge that there are significant distinctions between business models at different points along the spectrum. Closer to the profit-maximizing side of the spectrum, you might find corporate philanthropy or corporate social responsibility initiatives. Closer to the nonprofit side of the spectrum, you might find nonprofit organizations using an earned income strategy to sustain a set of social services. Within this wide spectrum, I have seen mainstream media label two particular business models as “social enterprise”—the stakeholder governance model and the “buy-one-give-one” model—which I’ll briefly describe here.

The first model is the stakeholder governance model (also called the stakeholder relationship management model) which is espoused by communitarian and team production scholars and has emerged as a prototypical business model of social enterprise. Social entrepreneurs who employ this model have shifted away from the singular focus of creating shareholder value and embraced a holistic notion that a business’s constituents all deserve a fair return on their investments, whether investments of capital, labor, natural resources, or other factors of production. I believe that this is the type of business model that B Lab, along with other social and environmental impact accounting firms, assess and certify as the gold standard in “doing business well”. [Please correct me if I’m wrong.] One might look to Greyston Bakery, the iconic social enterprise, as an example. Greyston Bakery is a Yonkers, New York-based bakery that dedicates itself to community renewal by providing sustainable employment—including fair wages, benefits, and equity participation—to low-income community members and reinvesting significant profits in the Greyston Foundation, which provides jobs, job training, affordable housing, youth services, and health care to the Yonkers community. Greyston Bakery’s motto is, “We don’t hire people to bake brownies. We bake brownies to hire people.” Greyston became the first social enterprise to register as a benefit corporation in New York when the legislation passed earlier this year. Greyston seemingly treats its factors of production—labor, capital, and land—in an equitable and sustainable manner (although it seems to emphasize labor). This is the essence of the stakeholder governance model, and possibly what many “true believers” in social enterprise think of when they use the term.

The second business model of social enterprise is quite the opposite. It is the “buy one, give one” or “BOGO” business model. Under the BOGO model, a for-profit company sells products or services in a developed nation and donates similar (but different) products or services in a developing nation. The social entrepreneurs employing the BOGO model seem to be less concerned with transforming corporate governance structures and are seemingly focused on the impact that their businesses have on ameliorating an immediate social, health, or environmental problem. The most prominent example of the BOGO model is TOMS, a Los Angeles based shoe company founded by Blake Mycoskie. For every pair of TOMS shoes sold at a luxury retail store in developed countries, the company works with humanitary organizations to identify and give a free pair of shoes to children in developing countries. Other social enterprises that have followed TOMS lead include Warby Parker which donates eye glasses and Baby Teresa which donates baby clothes. Consumers in the developed world can now purchase a wide range of clothes and household goods using the BOGO model.

The BOGO business model is based on charitable philanthropy and has many critics, including me. Corporate philanthropy is a term often used in a derogatory manner by social entrepreneurs and development social scientists that embrace sustainability. The Chinese proverb tells us that “if you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.” The BOGO model relies on marked-up prices in developed countries to pay for the creation of similar products and services in developing countries. The BOGO model also floods developing markets with free products thereby diminishing the need and capacity of a developing country to manufacture and produce its own products for its own markets. To me, the model also relies heavily on the charitable heartstrings of individuals in developed countries who wish to contribute to a social or environmental issue and feel guilty about their own consumerism and privilege. To many, the BOGO business model is not “true” social enterprise.

Nonetheless, this issue is not as clear as it seems. Greyston Foundation, the nonprofit arm of Greyston Bakery, is also corporate philanthropy—profits from the bakery are donated to the foundation for charitable services. What really distinguishes the two models? Would TOMS Shoes be a “true” social enterprise if it adopted a stakeholder governance model for its internal governance structure? If so, it would seem that I am comparing apples to oranges—internal corporate governance to business strategy. That is, one might consider the internal workings of a business—the corporate governance—as the feature that distinguishes regular businesses or nonprofits from social enterprise. Those businesses that adopt a stakeholder governance model of corporate governance are social enterprises, those that do not are not social enterprises, even if they do adopt a business strategy that performs charitable or philanthropic work. What’s your take? Is that distinction too simplistic? What governance or business models have I overlooked?

[Disclaimer: my interest in these business models is partly for an article that I am writing, to be presented at a panel of the Nonprofit Law and Philanthropy Section of the American Association of Law Schools Annual Meeting on January 6, 2013.]