Alicia Plerhoples, Author at socentlaw - Page 4 of 6

SOCIAL ENTERPRISE AND SECURITIES LAW

Joan MacLeod Heminway (University of Tennessee College of the Law) has written the first, or at least one of the first, academic law articles on the application of federal securities law to social enterprises. Here’s the article abstract:

To Be or Not to Be (A Security): Funding For-Profit Social EnterprisesThis article explores the federal securities law status of financial interests in for-profit social enterprise entities. When analyzed through the lens of the Securities Act of 1933 and the Securities Exchange Act of 1934, financial interests in social enterprise businesses raise both concerns and opportunities. Ultimately, the federal securities regulation status of interests in for-profit social enterprise ventures is important for choice-of-entity reasons (since the regulatory framework may impose different costs on interests in different structural business forms), for capital-structuring reasons within individual forms of entity, and for risk-management reasons at the entity level. In addition, an inquiry into the applicability of federal securities regulation to the funding of social enterprise serves as a catalyst for further thought on the optimal applicability of federal securities regulation to interests in business entities and projects.

As I recently told Joan, I wish that my students had the benefit of reading her article this spring semester during my Social Entrepreneurship & the Law Practicum course. During the course, the students drafted a legal case study for Ashoka that details the securities law issues faced by a for-profit social enterprise that uses crowdfunding to finance small solar power projects in developing countries. In the case study, the students address how the social enterprises’ capital-raising vehicle is not a “security” because it offers no expectation of financial return and offers no claim on the company’s assets in liquidation. I look forward to reading more about the application (and inapplication or exemption) of securities law to social enterprise finance. Indeed, this summer I’m supervising an independent research paper by another law student on this very issue — hopefully that will go to print and I’ll be sharing it on this blog as well soon enough.

THE LAW AS A POWERFUL TOOL FOR SOCIAL IMPACT ⎪ MAY 9, 2013 ⎪ ARLINGTON, VA

Georgetown Law students from my Social Entrepreneurship & The Law practicum course will be presenting their final projects — legal case studies of two social enterprises — at Ashoka tomorrow. Here’s the invitation: Ashoka + Georgetown Law Invitation. Please note that the event is NOT open to the public to attend in person but you can listen in on Google Hangout (for details email socialenterprise (at) law.georgetown.edu).

Ashoka and Georgetown Law, along with the University of Michigan Law School and the George Washington University Law School, are engaged in a partnership to contribute to the field of social enterprise law and provide legal support to Ashoka Fellows (see more on this collaboration here). Our collaborative approach is two-prong: First, through experiential learning courses, including the transactional law clinics at each school, law students collaborate to develop and share “best practices” for the sector through production of legal toolkits and research that helps Ashoka further its charitable mission, and support the field. Second, law students at each school (through transactional law clinics) provide direct legal representation to selected social enterprises within Ashoka’s network on business, corporate, nonprofit, and other transactional legal matters. The legal case studies that will be presented at the May 9th event are part of this collaborative effort. With the legal case studies we hope to illuminate some of the legal issues that social enterprises face and identify how social enterprise attorneys are adapting current legal and regulatory regimes to fit their clients’ social purposes. The Georgetown Law students will discuss crowdfunding, securities law, corporate governance, and U.K. community interest companies, among other topics. The legal case studies will be posted on Ashoka’s new legal website (launching this summer I believe).

MARKETPLACE FAIRNESS ACT: VALUES AND TAXES

The Marketplace Fairness Act would force internet retailers to collect sales tax from their internet customers. This proposed legislation certainly affects social enterprises, the majority of whom are small businesses, and some of whom may compete with internet Goliaths like Amazon.com and Overstock.com. No matter what spin the Heritage Foundation tries to put on it, the Act would be a step forward in leveling the playing field so that internet retailers and bricks-and-mortar small businesses can compete on unit price and not on sales tax. When internet retailers gain a competitive advantage through a loophole in the law (and not necessarily through innovation or a superior product or service), consumers lose in the long run. A race to the bottom is not sustainable.

It’s interesting to note too that the internet retailers whose gross annual receipts in internet sales that don’t exceed $1 million are exempt from collecting sales tax. This would seem to dispel the claims of retailers like Etsy and eBay that the Act harms their individual sellers who cannot incorporate a complex sales tax system into their home businesses (if individual sellers have sales of $1 million, I’m clearly in the wrong field and will be opening up my Etsy shop soon!)

The Act, or rather, reaction to the Act also raises a broader question that I am researching right now — that is, the intersection of social enterprise, values, and politics. Etsy is a Certified B Corporation. Etsy’s mission statement includes conducting a “mindful, transparent, and humane business”. How does a social enterprise’s embrace of sustainable business practices square with opposition to a sales tax that all brick-and-mortar stores face? (Note: Etsy actually supports the Act but advocates for raising the exemption higher, to the federal definitions of “small business”).

Does the “S” in social impact reporting always include employees?

Over at the American Constitution Society’s blog, I just posted some thoughts about how advocates can use corporate law to advance workers’ rights. Social enterprise falls clearly into this category. There are many social enterprise business models in which “social” is synonymous with employees. FareStart, a Seattle restaurant, is an obvious example (I’ve had the pleasure of eating there). FareStart’s employees are homeless and disadvantaged individuals, and are part of a culinary job training and job placement program. The restaurant operates purely for the benefit of its employees. But it seems to me that there are many other social enterprise business models—those where employees are not the beneficiaries—that loose sight of workers’ rights in their own operations because they are so focused on making an impact on some other constituency, like communities in developing countries, or the environment.

Here are my brief thoughts on this issue from the ACS blog:

“Despite the small trend towards social enterprise and “stakeholder governance,” the movement seems to engage environmental and philanthropic concerns far more than worker concerns. For example, social impact reports of companies tend to highlight environmentally-friendly business operations like recycling, low water usage, and carbon-neutral footprints. These reports also highlight corporate giving to charitable causes. Rarely do they discuss the livelihoods of their own workers. The worker voice is absent from social impact reports, or if the worker voice is included, it is only to highlight some minimal effort to engage and support workers—like paying a minimum wage—which only legitimizes a subpar standard. Unions and worker rights groups should challenge prioritization of other stakeholders by engaging with those who claim to support corporate law reforms to “make business better”. The worker voice needs to be inserted into the social enterprise movement, promotion of the benefit corporation statute, and into social impact reporting.”

In some ways, this is an issue similar to one that has been discussed for a long time in the nonprofit world—that is, low salaries and general mistreatment of nonprofit employees. Because the nonprofit employee is working for a charity, it is assumed that she (and it usually is a “she”) will work long hours for little money and no benefits. Let’s hope that type of thinking has not migrated to the social enterprise world. Social enterprises need to remember than “social” does not just mean societal impact; it’s an issue that is much closer to home than that.

MUHAMMAD YUNUS AT GEORGETOWN│ 4/17 │ WASHINGTON, D.C.

Muhammad Yunus will be speaking at Georgetown on April 17th. Although it is a free event, tickets are required and the event is sold out. For those who still want to watch, it will be webcast here. I will be attending the event in person and hope to post some reflection on his talk after. To preview his story, here’s an HBR interview with Yunus last December.

DR. MUHAMMAD YUNUS
Nobel Peace Prize Laureate & Founder of the Grameen Bank

Wednesday, April 17, 2013

Dr. Yunus will be offering a lecture at Georgetown University on

“Social Business and Microcredit for Women’s Empowerment and Poverty Alleviation”

With remarks by:

Melanne Verveer
Executive Director, Georgetown Institute for Women, Peace and Security &
Former U.S Ambassador-at-Large for Global Women’s Issues

Ann Van Dusen
Director, Georgetown School of Foreign Service, M.A. in Global Human Development Program

3 p.m. to 4 p.m.

This event will be webcast at http://webcast.georgetown.edu

Brought to you by The Yunus Centre, The Georgetown Institute for Women, Peace and Security and The SFS M.A. in Global Human Development Program

CROWDIMPACT’S DEFINITION OF SOCIAL ENTERPRISE

As we all continue our analysis and search for a definition of social enterprise that captures the movement’s spirit while also being accurate, I thought that I’d share CrowdImpact’s definition of a “social enterprise business” below (note, this definition only covers for-profit businesses and not non-profits). I like this business definition so much so that I may adopt it for my Social Enterprise & Nonprofit Law Clinic at Georgetown. The definition below (1) acknowledges that a social enterprise is more than it’s choice of legal entity and (2) prioritizes the commitment to make both an internal and external impact.

There is one aspect of this definition that I take issue with, and this is an issue that I have been trying to reconcile whenever I describe social enterprise as well. Most descriptions of social enterprise include a statement like “the primary purpose is not to make money.” I think that people knowledgeable about social enterprise understand this to mean the following: “the primary purpose is not to fatten the pockets of already wealthy owners and investors.” Because for many social enterprises, the purpose precisely is to make money or redistribute wealth – e.g., to make money to reinvest in the social enterprise’s impact efforts, or to facilitate wealth creation opportunities for low-income people or people at the bottom of the pyramid.

With that caveat, here is CrowdImpact’s Definition of a Social Enterprise Business:

A Social Enterprise business has:
1. Internal Impact in the way they treat employees, engage in production, select materials, and other factors.
2. External Impact in what they contribute to the environment, their community, and/or humanity.
3. Legal Accountability in their incorporation documents, mission statements or stated values.

Other things that help you define if your company is a for-profit social enterprise:
• It generates revenue through the sale of products and/or services.
• It applies entrepreneurial approaches to addressing social, environmental and human justice issues.
• Its purpose is beyond making money. It incorporates higher goals for the improvement of the environment, humanity and/or community.

ABA MEETING WITH TWO SOCIAL ENTERPRISE PANELS│ 4/5-6/13 │ WASHINGTON, D.C.

There will be two panels on social enterprise law at the upcoming ABA Business Law Section Spring Meeting in Washington, D.C. Details below. Law students can register for this conference for free!

You’ve Been Asked To Set Up A Social Entrepreneurship Organization – A How To Primer

Social Entrepreneurship options include LLCs, parallel nonprofit/business entities, LC3s, benefit corporations and social impact bonds. A
distinguished panel will discuss those options and the governance issues these choices present. Where are other jurisdictions are heading?
We’ll end by discussing how to promote public buy-in of the public benefit these organizations promote.

Program Chair and Moderator:
David Tang, Attorney, Gowling Lafleur Henderson, Toronto, Ontario, Canada

Speakers:
William H. Clark, Jr., Partner, Drinker Biddle & Reath LLP, Philadelphia, PA
Bart Houlahan, Co-Founder, B LAB, Berwyn, PA
Robert Keatinge, Of Counsel, Holland & Hart LLP, Denver, CO
Stephen Lloyd, Senior Partner and Head of Department, Bates Wells & Braithwaite, London, United Kingdom
Marcus S. Owens, Member, Caplin & Drysdale, Washington, DC
Allen Sparkman, Attorney, Sparkman & Foote, Houston, TX

Friday, 4/5/13, 10:30 AM – 12:30 PM Georgetown, Concourse Level, Washington Hotel

Governance of Nonprofit Organizations Joint Meeting

Speaker:  Alicia Plerhoples, Associate Professor of Law and Director of the Social Enterprise & Nonprofit Law Clinic, Georgetown University Law
Center, Washington, DC. Professor Plerhoples will speak on “Representing Social Enterprise, Facilitating Mission-Driven Corporate Governance.”

Saturday, 4/6/13, 3:30 PM – 4:30 PM Columbia 2, Terrace Level, Washington Hilton

MORE ON INTEREST CONVERGENCE: CONSERVATIVE & LIBERAL SUPPORT OF SOCIAL ENTERPRISE

I am continuing my research on interest convergence as a reason why the social enterprise movement has been successful (or at least recently gained momentum). This time I am looking at interest convergence from an ideological standpoint. Another brilliant aspect of social enterprise is that its goals do not fall neatly into conservative or liberal ideology. Consider, for example, (i) that the benefit corporation statutes adopted in twelve states and the District of Columbia generally have been passed with overwhelmingly bipartisan support, (2) social enterprises have been founded by conservative and liberal entrepreneurs alike, and (3) social enterprise missions are often couched in both conservative and liberal language (e.g., typically-conservative anti-government, anti-poverty language of “self-sufficiency” but also typically-liberal language of “doing good” and “giving back”.) Although the benefit corporation is not synonymous with social enterprise, it can be taken as a proxy—and the benefit corporation concept has widespread bipartisan appeal. The ends are attractive to liberals; conservatives like the means. Generically, liberals want the problems to be solved; conservatives want the problems solved without government and with some modicum of self-sufficiency and sustainability.

This leads me to ponder if social and environmental impact measurements also incorporate the normative values of both conservatives and liberals. Certainly, some of the typical slogans are similar. Is “Made in America” (which often makes me wary) the same as “Buy Local” (which sounds so much more pleasant and quaint)? When we talk about sustainability, what definitions of community are being employed? Is it the local community, national community, or global community? Are we talking about “us vs. them” (where “them” typically denotes Chinese laborers who are “stealing” American jobs)? Similarly, on an academic panel on social enterprise last fall, I asked a representative from an organization that sets social and environmental impact measurement standards whether or not Chick-fil-A, the infamous, privately-held fast food restaurant which claims to pay competitive wages, provides employee health and retirement benefits, prizes its environmental stewardship (which includes recycling, energy and water conservation, a sustainable supply chain, and a LEED-certified “test” restaurant) but contributes a portion of its profits to a family foundation that funds anti-same-sex marriage initiatives, can be considered a social enterprise. The response was “no.”

I have never been one to defend a company like Chick-fil-a (ever). And I am in no way defending Chick-fil-a right now (really, please take me at my word). But I am still puzzling about the distinguishing feature of social enterprise – what is the core of social enterprise? In my most recent article, I present various business models of social enterprise, including a philanthropy-based business model through which companies donate profits to foundations to do good (like TOMS Shoes or any other Buy-One-Give-One business, which I generally am not a fan of). What Chick-fil-a donates to its conservative, anti-gay family foundation may fit into this philanthropy-based business model. Perhaps what a company does with its profits (i.e., revenue minus cost) is just philanthropy, comparative to a shareholder who has received dividends off the profits of a company and then goes and donates to Goodwill. But the things that Chick-fil-a does with its core business—the employee benefits, the environmental stewardship, etc.—maybe that is a truer measure or defining characteristic of a social enterprise.

Stay with me here. Let’s forget that Chick-fil-A funds a conservative, anti-gay family foundation. Some might say that such donations are not the core of Chick-fil-A’s chicken-selling business. Instead, let’s think about Chick-fil-A’s closure on Sundays. That is, it is Chick-fil-A’s corporate policy to close on Sunday and this is for religious reasons. According to the owners, Sunday is supposed to be a day of rest. This policy can probably go in the category of “conservative values.” Nonetheless, the policy may align with liberal sympathies for employees—employees shouldn’t be overworked and should be given time off to spend with their families. For example, there is always liberal outcry against Walmart and other big box stores that stay open on Thanksgiving or Christmas day. My question is—is Chick-fil-A’s policy of closing on Sundays a “plus” on the social and environmental measurements scale? Does it matter that the policy is in place for religious reasons? What are the normative values incorporated into social and environmental measurements? Do they have room for conservative values? Or do they have room for conservative values only to the extent that the end result of those values converge with liberal sympathies?

(Note: I have to thank Haskell Murray for initiating some of this conversation over at The Conglomerate blog in August: http://www.theconglomerate.org/2012/08/chick-fil-a-as-a-social-enterprise.html).

 

REPRESENTING SOCIAL ENTERPRISE IN A LAW SCHOOL CLINIC

I have been working on a new article about the pedagogical value to law students of representing social enterprise clients through experiential law courses. Although the primary audience for the article is academics, including corporate and clinical law professors, I hope that the article will be helpful to other lawyers as well. In that respect, the article includes a robust 10-page(!) description of various models of social enterprise as well as a discussion of the corporate legal theories that either facilitate or reject the shareholder wealth maximization norm.

Here’s the abstract and link:

Careful consideration and selection of clients facilitate the pedagogical objectives of a clinical law program or other experiential learning course. This article explores the selection of social enterprises—i.e., nonprofit and for-profit organizations whose managers strategically and purposefully work to create social, environmental, and economic value or achieve a social good through the use of business techniques—as clients of two experiential learning courses at Georgetown University Law Center. Representation of social enterprises helps create a dynamic curriculum through which law students learn to merge legal theory and practice. Through service to social enterprises, law students (i) learn about sustainable business models and mechanisms at a time when the corporate sector has increased its response to sustainability challenges; (ii) examine corporate legal theory that undermines social enterprise initiatives with an eye towards advocating for more favorable law and policy; and (iii) assist in advancing the social enterprise sector through knowledge creation and information facilitation. Legal issues unique to social enterprises compel students to learn about and reflect on corporate law in a novel manner not typically present in the non-experiential classroom.  [Article available here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2214954]

 

NYU LAW FELLOWSHIP IN ENTREPRENEURSHIP, SOCIAL ENTREPRENEURSHIP, AND INNOVATION

NYU Law is seeking a research fellow in entrepreneurship, social entrepreneurship, and innovation. Having gotten to know the last two fellows, I highly recommend this program. Application deadline is February 28, 2013. Info here: http://www.law.nyu.edu/leadershipprogram/socialenterprise/index.htm.