September 2013 - socentlaw

WASHINGTON POST: BALANCED COVERAGE OF BENEFIT CORPORATIONS?

This article on benefit corporations in today’s Washington Post is the best one that I’ve seen in mainstream media (i.e., not academic or practice-based articles). Newspaper articles obviously aren’t able to go into the same depth as an academic article but I am still always surprised about the misinformation that is in mainstream media articles about benefit corporations. Often those articles don’t make a distinction between B Corp certification and benefit corporation; they tout shareholder wealth maximization up as well-established law; and they claim that the benefit corporation is a panacea. This article tries to express the nuances of all of these claims, although the title is still a bit sensationalist. Find the article here.

Notably, Plum Organic’s founder acknowledges that being a benefit corporation is all about branding.

DELAWARE PUBLIC BENEFIT CORPORATIONS │ 10/5/13 │ CHARLESTON, SC

On October 5th, I will be presenting on Delaware’s Public Benefit Corporation law at the Southeastern Law Scholars Conference in one of my favorite cities, Charleston, SC.

The abstract from my proposal (and forthcoming journal article) follows:

“Systems should exist to serve society.  Right now our capitalist system is not serving society; it’s serving shareholders.  And we can’t run around expecting different outcomes until we change the rules of the game.”   -Jay Coen Gilbert (Co-founder, B-Lab)

“Delaware, the leading incorporation state, engages in significant, and continual, legal innovation. . . . Delaware is not the only state to be continually revising its corporation code: other states invariably follow suit, revising their codes to follow Delaware’s innovations.”  -Roberta Romano (Professor, Yale Law School)

B Lab co-founder Jay Coen Gilbert provided the introductory quote in his 2010 TEDx Talk in Philadelphia on certified B corporations.   Since 2010, B Lab has been quite active.  Not only has the non-profit organization privately certified over 800 companies, but B Lab has also taken the lead in successfully convincing 19 states and Washington, D.C. to pass benefit corporation statutes:  in their words, “changing the rules of the game.”   After eighteen months of lobbying and negotiation, B Lab even convinced Delaware, the recognized pacesetter in U.S. corporate law, to amend its corporate statute.   Delaware, however, cut its own path in regard to the benefit corporation form.  Delaware is quite sensitive to issues involving corporate law and often acts quickly to protect its strong market position.   While most of the other states appear to have worked from the Model Benefit Corporation Legislation (the “Model”) and stayed relatively close it, Delaware seems to have merely consulted the Model and created a largely new social enterprise form that Delaware calls a public benefit corporation (“PBC”).   This article builds on the author’s previous work on benefit corporations, compares the Model and the PBC amendments, and offers suggestions for improving the law.

This article proceeds in five primary parts.  Part I of this article provides a brief overview of benefit corporations, the PBC amendments, and the legal side of the social enterprise movement more generally.  Part II claims that the PBC amendments allow more private ordering than does the Model, and argues that most of the PBC provisions providing additional flexibility are positive developments.  Part III posits that the PBC provides superior guidance to directors, but also makes suggestions for providing additional clarity.  Part IV dissects the branding aspect of both the Model and the PBC, decides that the Model provides for slightly better branding, but opines that the social enterprise branding efforts are best left to the private market.  Part V briefly examines remaining governance and ethical challenges facing those associated with PBCs and sets the stage for future research.  The article concludes with a summary of the article’s main points and projections related to the future of social enterprise legislation in wake of Delaware’s innovations.

BENEFIT CORPORATION INFOGRAPHIC

infographic; benefit corporation

Benefit Corporation Adoption

SHAREHOLDER WEALTH MAXIMIZATION IN MAINSTREAM MEDIA

Here’s an article in the Business section of the Washington Post that some of you may find interesting: How the Cult of Shareholder Value Wrecked American business by Stephen Pearlstein. Pearlstein references solutions to SWM like impact investing and the benefit corporation. He sets forth regulatory and legal reforms that would encourage long-term corporate decision-making, including:

 

— The capital gains tax could be recalibrated so that short-term trading profits are taxed the same as wages and salary, while gains from investments held for long periods are taxed more lightly than they are now, or not at all. A small transaction tax could also dampen enthusiasm for short-term trading.

— The Securities and Exchange Commission could adopt rules that discourage corporations from giving quarterly earnings projections or guidance, while accounting regulators could insist that corporate financial reports better reflect long-term costs and benefits and measure long-term value creation.

— States could make it easier for corporations to adopt governance rules that give long-term shareholders more power in selecting directors, approving mergers and takeovers and setting executive compensation.

 

LAW FELLOWSHIP WITH SOCIAL ENTERPRISE CLINIC

Georgetown University Law CenterSocial Enterprise and Nonprofit Law Clinic
Graduate Teaching Fellowship

Description of the Clinic

The Social Enterprise & Nonprofit Law Clinic at Georgetown University Law Center offers pro bono corporate and transactional legal services to social enterprises, nonprofit organizations, and select small businesses in Washington, D.C. and internationally. Through the Clinic, law students learn to translate theory into practice by engaging in the supervised practice of law for educational credit. The Clinic’s goals are consistent with Georgetown University’s long tradition of public service. The Clinic’s goals are to:

• Teach law students the materials, expectations, strategies, methods, and lexicon of transactional lawyering, as well as an appreciation for how transactional law can be used in the public interest.
• Represent social enterprises and nonprofit organizations in corporate and transactional legal matters.
• Facilitate the growth of social enterprise in the D.C. area.

In the Clinic, law students learn about corporate governance, 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 transactional lawyers understand both the legal and non-legal incentive structures that drive business organizations.

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 social enterprise and sustainable business. 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. Successful completion of the fellowship results in the award of an L.L.M. in Advocacy from Georgetown University. The fellowship start date is July 1, 2014, and the fellowship is for two years, ending June 30, 2016.

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, and a detailed letter of interest by December 1, 2013. 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, and email it to [email protected] Emailed applications are preferred.

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.

ATTORNEY ROLES IN SOCIAL ENTREPRENEURSHIP

Dr. Zach Kaufman recently published an essay on LawForChange.org exploring the ten roles that attorneys have taken to support social entrepreneurship. The essay provides a clear overview of possibilities for the law students and young attorneys hoping to get their feet wet in the sector. An unexpected fact I found in the article was the identification of four major law firms that now have practice areas devoted to impact investing, social impact finance, or social entrepreneurship (I will add a fifth: Drinker Biddle & Reath has a Benefit Corporations & Corporate Sustainability practice led by Bill Clark, the drafter of the benefit corporation model statute). You can find Dr. Kauffman’s essay here. [Full disclosure: the article references many of the educational and scholarly contributions of the contributors to this blog, myself included]. The article abstract is below.

Making Social and Environmental Impact Through Legal Careers: The Top 10 Roles for Attorneys in Social Entrepreneurship (Zachary D. Kaufman)

Social entrepreneurship and law are increasingly interconnected. This article enumerates ten ways in which law students and attorneys can play a meaningful and often unique role in social entrepreneurship. The roles and examples described span the public and private sectors. However, these ten typologies—(1) The Student, (2) The Social Entrepreneur, (3) The Social Enterprise Staffer, (4) The Outside Counsel, (5) The In-House Counsel, (6) The Government Official, (7) The Scholar, (8) The Writer, (9) The Board Member, and (10) The Fundraiser—are by no means exhaustive. As the article discusses, anybody with a legal background can become involved in social entrepreneurship in multiple ways.

LIVESTREAM: UNIVERSITY OF MICHIGAN LAW SCHOOL’S INTERNATIONAL TRANSACTIONS CLINIC

In the fall of 2008, the University of Michigan Law School launched an International Transactions Clinic (ITC), a first of its kind in legal education in the United States. The ITC provides pro bono legal advice to organizations that have an international focus and are working to improve the world with innovative business models, products, and services.  Together the ITC and its clients are proving that it is possible to do good by doing deals – globally.

On Thursday, September 12, alumni and clients of the ITC are convening in Ann Arbor, Michigan to reflect on the clinic’s first five years.  The proceedings of this celebration will be streamed live from 1:30 – 6:15 pm (EDT) at: https://www.law.umich.edu/multimedia/streaming/Pages/20130912itc.aspx

Rachel Robbins, former General Counsel of the International Finance Corporation, will be delivering the keynote address. Nearly a dozen of the ITC’s clients will talk about “The Art of Lawyering Deals that Generate Social and Financial Returns (at Home and Abroad)” and “How to Structure Equity Exits from Double Bottomline Enterprises.”  And recent ITC law student alumni will talk about how this clinical legal experience has shaped the start of their careers (and sense of professional opportunities).

For more information about the program, speakers and resources (including video links to three of the ITC’s recent deals), please check out this website:  law.umich.edu/ITCcelebration