Alicia Plerhoples, Author at socentlaw - Page 3 of 6

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:

ALTER ECO

American Prison Data Systems

Better Than We Found It

Exemplar Companies

Fair Parenting Project

Farmigo

Grassroots Capital Management

Ian Martin Group

Imani Energy

New Leaf Paper

Plexx

Profile Health Systems

Roozt

Socratic Labs

Venture Pilot

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.

 

ABA JOURNAL: BEST LEGAL BLOGS NOMINATIONS

The ABA Journal is looking for nominations for the 100 best legal blogs. We cannot nominate the Socent Law Blog (self-nominations are prohibited), but maybe you find us interesting and useful. More information on the call for nominations here.

 

 

 

ESOPS AS SOCIAL ENTERPRISE

The NY Times opinion page has an op-ed today urging retiring baby boomers to sell their companies to their employees, as New Belgium Brewing Company has. The article doesn’t mention this but New Belgium Brewing recently converted to a public benefit corporation under Colorado’s new law. What do ESOPs and social enterprise have to do with each other? I describe the connection in my forthcoming article Representing Social Enterprise (a recently revised version is found here). An excerpt:

A.             How They Do It: Pluralist Ownership Business Model

A second model of social enterprise that turns on employing internal governance structures and practices to create a positive social or environmental impact is the pluralist business model. Advocates of this model argue that “sustainable social organization evolves out of equitable relationships” where distinctions between capital and labor are not “inevitable” and the employer-employee relationship is replaced by a pluralist ownership model.[1]

[T]hese models challenge the prevailing views on who controls the enterprise and how surplus value should be distributed amongst stakeholders. They also challenge the reliance [in corporate law] on ‘independent’ directors to make ‘rational’ judgments to protect shareholder interests and favor internalization of conflicts and socio-economic thinking guided by corporate debate.[2]

In the United States, the business models that align most with the pluralist ownership business model are so-called “democratic workplaces,” the most common of which are the employee stock ownership plan (ESOP) and worker cooperatives. Consider Publix Super Markets, an employee-owned[3] supermarket chain in the southern United States. Publix Super Markets has more than 1000 stores and had net earnings of approximately $1.4 billion in 2011. The company’s stock is not traded on any securities market. Publix’s common stock is only available to its current employees (and their beneficiaries) through an ESOP and the company’s 401(k) Plan.[4] Publix stock is owned entirely by its employees and its non-employee directors. ESOPs are implemented in companies for a variety of reasons: as a source of retirement funds for employees, to provide employees with a means of participation in company decisions, to maintain company culture or mission, and to align employee and management interests.

Although it is unclear whether this pluralist ownership model is the cause or an effect of Publix’s exceptional corporate social responsibility (CSR) initiatives,[5] it is evident that Publix is a mission-driven company. Publix publishes a Social and Environmental Stewardship Report each year, highlighting its socially and environmentally-friendly business operations pertaining to recycling and waste management, resource and water conservation, greenhouse gas emissions management, sustainably-sourced products, salvage food program to feed the hungry, and LEED-certified stores.[6]  In 2011, Publix ranked first on the Corporate Social Responsibility Index produced by the Boston College Center for Corporate Citizenship and the Reputation Institute.[7] The CSR Index bases its rankings on the perception of a company to the public in three areas: “citizenship” (i.e., socially and environmentally responsible impact on surrounding community), “governance” (i.e., fair, transparent, and ethical business practices), and “workplace” (i.e., fair employee treatment and investment in employee careers).[8]

Worker cooperatives fully embrace the pluralist ownership model, perhaps to a greater extent than companies with ESOPs. The distinguishing characteristics of a worker cooperative are twofold: “(1) workers invest in and own the business, and (2) decision-making is democratic, generally adhering to the principle of one worker-one vote.”[9] Governance rights are not tied to equity participation—each worker has one vote. Worker cooperatives are often employed as part of a larger community economic development and poverty reduction agenda,[10] and as a means of establishing an equitable relationship between the capital and labor of a business.

Equal Exchange is an example of a worker cooperative. Equal Exchange builds long-term trade partnerships with sustainable farmers cooperatives and distributes fair trade products such as coffee and tea.[11] Equal Exchange has a “one-worker, one-vote” governance structure with a board elected by co-op employees, a president that has the same single share as the other co-op members, and a maximum executive-to-worker compensation of 4-to-1.[12] Daniel Fireside, the Capital Coordinator at Equal Exchange explains the connection between social enterprise and the pluralist ownership business model: “for social enterprises to claim the mantel of being socially responsible, you’ve got to do more than make a great product or treat your workers with respect. To make profound changes to the economy, you’ve also got to change the way you think of ownership, investment, and power.”


[1] Ridley-Duff, supra note 31, at 383-384, 386 (citing studies that support the idea that “sustainable companies (and economies) are built slowly by groups of people who collaborate over many years and not through deliberate agency of visionary leaders or charismatic entrepreneurs.”).

[2] Id. (using some United Kingdom companies as examples of companies that have embraced pluralist business models).

[3] Under ESOPs, employees own the stock of the company. Whether those employee-stockholders can truly be considered “owners” of the company is up for debate. Generally, stockholders are not considered “owners” of a widely-held corporation. As stockholders, they only have a residual interest in the firm’s assets. They do not have decision-making rights over the firm’s day-to-day activities, nor can they unilaterally dissolve the firm.

[4] Publix Super Markets, Inc., Annual Report (Form 10-K) (2012).

[5] There are numerous research reports that have found that ESOPs enhance corporate and worker performance, and others that find no such effect. See generally, Research on Employee Ownership, Corporate Performance, and Employee Compensation, National Center for Employee Ownership, http://www.nceo.org/articles/research-employee-ownership-corporate-performance (last visited Jan. 10, 2013).

[6] Publix Super Markets, Inc., Social and Environmental Stewardship Report (2011).

[7] Id.; Boston Coll. Ctr. for Corporate Citizenship, The 2011 Corporate Social Responsibility Index (2011), available at http://www.bcccc.net/pdf/CSRIReport2011.pdf.

[8] Boston Coll. Ctr. for Corporate Citizenship, supra note 46. Publix has been on Fortune’s list of the “100 Best Companies to Work For” since 1998. See Publix Super Markets, Inc., supra note 45.

[9] About Worker Cooperatives, U.S. Fed’n of Worker Coops., http://usworker.coop/aboutworkercoops (last visited Jan. 10, 2013); see also Puget Sound Plywood v. Commissioner, 44 T.C. 305 (1965) (defining cooperatives in a similar manner for tax purposes). For a thorough legal description of cooperatives, see Orsi, supra note 16, at 181-203.

[10] See, e.g., Gowri J. Krishna, Worker Cooperative Creation as Progressive Lawyering? Moving Beyond the One-Person, One-Vote Floor, 33 Berkeley J. of Emp. & Lab. L. (forthcoming 2013).

[11] Equal Exch., Annual Report (2011).

[12] Daniel Fireside, Equal Exchange’s Radical Approach to Corporate Social Responsibility, in Practicing Law in the Sharing Economy: Helping People Build Cooperatives, Social Enterprise, and Local Sustainable Economies, supra note 16, at 190-92.

 

CORPORATE LAWYER FOR SOUTH AFRICAN SOCIAL ENTERPRISE

Legal jobs at social enterprises do not arise often and so I’ve got to share this one that just landed in my inbox. It’s an in-house counsel position to the Awethu Project in South Africa. According to its website, Awethu identifies and develops high-potential entrepreneurs in under-resourced South African communities. Awethu receives funding from Echoing Green. Note that this job is located in South Africa. Here’s the link. Happy applying!

SOCIAL ENTERPRISE LEGAL CASE STUDIES

Last month I blogged about the collaboration between students at Georgetown Law and Ashoka to prepare legal case studies of two social enterprises. The legal case studies can now be found on the Social Enterprise & Nonprofit Law Clinic’s website here (links to the case studies are about three-quarters down the page as “examples of social enterprise”). The first legal case study examines innovative capital raising models undertaken by a social enterprise that provides solar power to communities in developing countries. Topics discussed include:
• Crowdfunding
• Securities Regulation
• Joining an Accelerator

The second legal case study explores the organizational structure and governance mechanisms employed by a wind farm social enterprise that partners with communities to facilitate their direct participation in the development of renewable energy from their collective community assets. Topics discussed include:
• Anchoring Social Missions with Legal Tools
• U.K. Community Interest Companies
• Avoiding Mission Drift Through Corporate Governance
• Engaging Communities and Mobilizing Community Assets

Enjoy!

BANKING WITH A BENEFIT CORPORATION: REWARDS, NOT JUST BRANDING

GreenChoice Bank is a thrift institution owned by an Illinois benefit corporation and claims to be the first bank organized under a benefit corporation. Read more about this bank here and here.

In reading the profile on GreenChoice Bank, nothing much struck me as unusual for a socially-responsible business or social enterprise — it pays a living wage, health insurance premiums, includes employees in management decisions, recycles, has LEED certified buildings, offers E-statements to customers, etc. All this is becoming rather standard in the social enterprise sector. But then one particular business strategy jumped out at me — GreenChoice provides better rates to green builders that are incorporating sustainability strategies into their building methods. GreenChoice is rewarding and encouraging “doing good.” While many may claim that the benefit corporation or social enterprise in general is just about branding, it seems that GreenChoice proves that theory wrong with its rewards strategy. Indeed, many social enterprises attempt to encourage customers to “do good” but most strategies that I’ve seen do so through psychic, not tangible rewards — e.g., customers of Better World Books can feel better about buying books from a company that recycles books and donates to literacy and educational programs. But the GreenChoice strategy goes beyond psychic rewards and offers tangible rewards (i.e., better deals on small business loans). I’m interested to hear of other social enterprises that offer tangible rewards to customers or clients in return for “doing good.” Of course, trying to make the world a less polluted, healthier, and equitable world is also a pretty tangible benefit, so maybe I should cabin my inquiry to direct and immediate tangible rewards.

CFP: CALIFORNIA MGMT REVIEW ON HYBRID ORGANIZATIONS

And another call for papers. . .

CALIFORNIA MANAGEMENT REVIEW CALL FOR PAPERS
Hybrid Organizations: Origins, Strategies, Impacts and Implications

The goal of this special issue is to stimulate authors to consider the rise of hybrid organizations, the ways in which they create and track the shared value to which they aspire, and the degree to which these models are sustainable over the long term.

More info here.

CFP: NYU STERN CONFERENCE ON SOCIAL ENTREPRENEURSHIP ⎪ NOVEMBER 2013 ⎪ NEW YORK, NY

Just received in my inbox. . .

CALL FOR ABSTRACTS
DEADLINE: September 1st, 2013

10th ANNUAL NYU-STERN CONFERENCE ON SOCIAL ENTREPRENEURSHIP

November 6, 7 & 8, 2013

Our annual NYU-Stern Conference on Social Entrepreneurship is dedicated to the ongoing development of theory and research on social entrepreneurship and its impact on global communities. The aim of the two-day academic conference is to bring together scholars in social entrepreneurship to discuss emerging concepts and themes in social entrepreneurship research. Conceptual papers, research papers presenting quantitative and/or qualitative data are welcome, as well as case studies and practitioner contributions. Our previous conference can be viewed here.

Conference Themes

Here are several research suggestions that may be interesting and highly provocative, although abstracts that address other relevant and timely themes of social entrepreneurship but are not covered below are also welcome:

  • Social entrepreneurship process involving opportunity recognition and evaluation
  • Organizational forms of social enterprises
  • Challenges of scaling and measuring social impact
  • Emerging themes in social entrepreneurship education
  • Cross-cultural comparative studies in social entrepreneurship
  • Research challenges in social entrepreneurship

Abstract and Paper Submission and Review Process

Authors who wish to present their papers at the conference should submit electronically a three-page abstract (double-spaced, times new roman font, size 12) by Sunday September 1st, 2013 to the conference co-Directors, Dr. Jill Kickul, Director of the NYU-Stern Program in Social Entrepreneurship, and Dr. Sophie Bacq, Assistant Professor of Social Entrepreneurship at Northeastern University: [email protected] and [email protected]

Abstracts will be selected and authors will be notified and invited by September 15th, 2013 to submit a full paper due on Monday October 28th, 2013.

We hope to see you here in November!

Best,
Jill and Sophie

DIY BENEFIT CORPORATION IN MICHIGAN

Here’s some very interesting news out of the International Transactions Clinic at University of Michigan Law School — the Clinic created the first do-it-yourself benefit corporation on behalf of a social enterprise client in Michigan. Michigan does not have a benefit corporation statute so the student lawyers in the Clinic created a DIY benefit corporation using the existing Michigan Business Corporation Act. This may lead the way for social entrepreneurs in other states that lack benefit corporation to bypass the state legislature, if the state’s regular Corporations Act is accommodating and the state corporations department will accept the incorporation paperwork. Full story here.