Link here. It’s the second story down after the jump. More press on this can also be found on the Georgetown Law website here because law students in my Social Enterprise & Nonprofit Law Clinic provided pro bono representation to this benefit corporation.
SOCIAL ENTREPRENEUR RINGS OPENING NYSE BELL FOR TWITTER
Story in today’s Times Dealbook by Professor Steven Davidoff.
MICROLOANS AND CASH TRANSFERS FOR THE POOR
Social business is not just for folks in developing countries at the base of the pyramid. According to this NY Times article, 45 million Americans live below the poverty line and could benefit from the same microfinance strategies used in developing countries. Grameen America operates 11 offices in the U.S. and has provided $100 million in loans to Americans. Notably, the same social shaming techniques are used for Grameen America microloans as in developing countries — borrowers must form a group and borrow, and one’s ability to borrow more in the future depends on the group’s repayment of the loans. The microloans must be used for entrepreneurial work, but no collateral is required.
A second NY Times article reports on research from Innovations for Poverty Action that found that giving poor Kenyan farmers money (as in cold, hard cash) improved their happiness and decreased stress. Additionally, the Kenyan families ate better and increased their livestock holdings by 51%. Education and health did not improve, but the cash transfers also did not lead to increased spending on alcohol and tobacco.
Should we be relying on microloans or cash transfers as an anti-poverty strategy in the United States? How does our differing perception of poor people in the U.S. versus developing countries affect our willingness to use one strategy versus the other?
Microloans used for entrepreneurial activities are likely to be more well-received in the U.S. because it is a sustainable strategy (the money is repaid and then loaned again) and because it is meant to motivate the recipient to work hard to put the loan to good use (and improve the recipient’s work ethic). Americans overwhelming regard poor people in the U.S. as poor based on their own failings (see Five Stereotypes about Poor People and Education in yesterday’s Washington Post) whereas poor people in developing countries are thought of as the “deserving poor” — people who are poor because of the lack of access to opportunity around them. As I’ve written about before, social enterprise may be so appealing to Americans — and state legislators — because of the American “pull-yourself-up-by-your-bootstrap” culture. Social enterprise softens this motto somewhat — social enterprise seems to offer “a hand up, not a hand out.”
B CORPS IN SOUTH AMERICA
B Lab has exported its brand abroad. Sistema B is the South American equivalent / partner of B Lab and certifies B Corps there. Sistema B is based in Chile but has certified companies in Brazil, Chile, Colombia, and Argentina. According to a blog post on B Lab’s website, B Lab is also working to replicate itself in Australia and in Europe.
My brief thoughts from the nonprofit perspective: Many countries have a different take on charities and NGOs than the U.S. does. Some do not allow NGOs to engage in any business activities and nonprofit status is available only for traditional charities. In the U.S., the IRS scrutinizes entities that apply for tax-exemption and have activities of a “commerical hue.” Nonetheless, under U.S. tax law, tax-exempt organizations are allowed to engage in business activities to a certain extent. It may be that countries that do not have a dynamic nonprofit sector (i.e., one that does not allow for hybrid operations or charitable activities beyond traditional concepts of “charity”) could benefit from B Corp certification, and perhaps even benefit from benefit corporation or other hybrid entity legislation.
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.
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 Center – Social 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.
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.
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@example.com. 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.
FIRST DELAWARE BENEFIT CORPORATIONS
B Lab has posted a list of companies that either converting or incorporated as benefit corporations under Delaware law today (the first effective day of the benefit corporation statute). The list of those companies is below but I’d like to highlight two significant ones here given their size and recent/ongoing acquisitions:
– Method — As in the green cleaning products found in Target. In 2012, Method became a subsidiary of Ecover Belgium NV, another global green cleaning product company.
– Plum Organics — The ubiquitous baby food line. Plum Organics is the #4 baby food company in the U.S. with $93m in sales in 2012. In May 2013, Campbell Soup announced that it was buying Plum Organics and would keep it as a distinct brand. I don’t have any updates as to whether that acquisition is still in process but as of May 2013 the deal was expected to close in the 4th quarter.
Having written about the flexible purpose corporation (a California stakeholder corporate form) being a viable way to safeguarding a company’s social mission in the mergers and acquisitions context (paper here) (Professor Haskell Murray similarly wrote about the benefit corporation in the M&A context – paper here), I am very curious as to how converting to a Delaware benefit corporation impacted or was a result of these two acquisitions. Did the companies always intend to convert in order to maintain their green missions? Was this negotiated as a part of the acquisition deal?
Another stand out amongst the Delaware benefit corporation crowd is RSF Capital Management, a subsidiary of RSF Social Finance — a major impact investor, social enterprise lender, and donor.
The other companies that incorporated or converted to the Delaware benefit corporate form are:
American Prison Data Systems
Better Than We Found It
Fair Parenting Project
Grassroots Capital Management
Ian Martin Group
New Leaf Paper
Profile Health Systems
DELAWARE BENEFIT CORPORATION – EFFECTIVE TODAY
Entities can incorporate or convert to a benefit corporation in Delaware, effective today. Some of us on this blog are trying to find out from the Delaware Secretary of State about the first incorporators today and hope keep you posted in the coming days. The CEO and co-founder of Plum Organics was at the signing ceremony for the legislation and committed to becoming one of the first Delaware benefit corporations (see video). If you don’t know what “Plum Organics” is, it’s safe to say that you don’t have young children (it is a ubiquitous toddler/infant staple). Stay tuned.