Haskell Murray, Author at socentlaw - Page 3 of 6


Kate Cooney (Yale), Matt Lee (Harvard), Justin Koushyar (Emory), and I (Belmont) have asked the titular question and are contacting the various secretary of state’s offices in states with benefit corporation laws in an attempt to compile reliable data.  Getting an accurate answer is not simple, however, because many states have simply lumped benefit corporations in with traditional corporations, and do not have an easy way to separate the two.

An employee at B Lab just sent me the data they have been able to scrape together given their powerful position in the social enterprise space.  Their data is about a month old (and therefore doesn’t include Delaware, which passed about a week ago and becomes effective 8/1/13).  According to the data B Lab has been able to collect, 251 benefit entities have been formed.  This is not to be confused with the 786 certified B corporations, which includes various entity types including traditional corporations and LLCs. See below for the number of benefit corporations broken down by state.  The number 251 includes benefit LLCs in Maryland.  Also, B Lab does not have data on New Jersey or South Carolina, and a number of state statutes are not yet effective.  It is possible that this data is incomplete, but these numbers are largely consistent with the data we have begun to assemble and with the early work of Professor Eric Talley (Berkeley) on California’s benefit corporations.

Frankly, some of these numbers are very similar to the numbers I was able to get on those states during my initial attempt last summer.  Also, for a few of the states, the current number is very similar to the number of benefit corporations formed on the very first day the given state statute became effective.  For example, New York reported 14 benefit corporations formed on the first day in early 2012, and evidently only 4 in the following year.  (The number of benefit corporations formed in NY on the first day varies a small bit, depending on the source, see here for 13, but, regardless, the general point remains the same).

Given that the first benefit corporation statute was passed only 3 years ago and some of the statutes (including Delaware’s) are not yet effective, it is a bit too early to judge the success or failure of the form.  However, fewer than 300 entities–spread over all the states with effective benefit corporation statutes–is a very small drop in the bucket.  Delaware has over 1 million entities formed in its state.  That said, benefit corporations have already captured plenty of headlines and caused vigorous academic debate.  Also, based on the response at various social enterprise symposia I have attended, it seems that the current generation of students has intense interest in this space.  Time will tell if the benefit corporation form ends up attracting more companies.


Not in effect yet


Not in effect yet




Not in effect yet

District of Columbia

Not in effect yet







Maryland (*included Benefit LLCs)




New Jersey


New York




South Carolina







I have updated my benefit corporation state statute chart here.  A number of states (Arizona, Arkansas, Colorado, Nevada, and Oregon) have passed benefit corporation statutes recently, but those are not effective yet and therefore have not yet been included.  Washington D.C.’s statute went effective in May, and is in this version of the chart.  D.C. seemed to follow the January 26, 2012 version of the model legislation without much deviation.

Also, I added and updated some of the more recent versions of the model legislation.  The changes in the model legislation have been quite interesting to me.  The most interesting recent change was moving from a fairly detailed definition of “independence” for the third party standard provider to simply ““[d]eveloped by an entity that is not controlled by the benefit corporation.”

As always, please feel free to contact me with any suggestions or potential corrections.


The following professors will be presenting on Crowdfunding Social Enterprise at a conference hosted by Leeds School of Business at University of Colorado-Boulder and the Ewing Marion Kauffman Foundation (July 12 to 13, 2013 in Boulder, CO):

Deborah Burand (Michigan)

Steven Dean (Brooklyn)

Joan Heminway (Tennessee)

Christine Hurt (Illinois)

Haskell Murray (Regent moving to Belmont August 2013)

Dana Brakman Reiser (Brooklyn)

The panel is scheduled for 2:30 p.m. to 3:45 p.m. on July 13, 2013.  The abstract of the panel is below:

Crowdfunding and social enterprise both grow from populist roots. In the eyes of proponents, the emergent legalization of crowdfund investing in the United States (through, e.g., the 2012 enactment of the Jumpstart Our Business Startups Act) and the increasing examination and adoption of separate forms of social enterprise entity (including, e.g., Delaware’s current consideration of benefit corporation legislation) hold promise to bring the benefits of capital finance and commercial enterprise to the masses. Given the common foundations of the crowdfunding and social enterprise movements, it seems logical to consider funding social enterprise by reaching out to the crowd.  Is a marriage of the two upstart phenomena—namely, the use of crowdfunding to finance social enterprise—a match made in heaven or an ill-fated pairing? This panel features five papers, each of which explores topics at the intersection of crowdfunding (including crowdfund investing) and social enterprise as a means of teasing out some of the relevant considerations.


Robert T. Esposito’s article The Social Enterprise Revolution in Corporate Law: A Primer on Emerging Corporate Entities in Europe and the United States and the Case for the Benefit Corporation is available here.

Next month, Robert will begin his time at NYU Law as a recipient of the Jacobson Fellowship in Social Entrepreneurship.

His article is well worth reading.  The abstract is below:

Remarkably, in the face of a global recession, the social enterprise sector continued to experience extraordinary growth in both financial support and the number of newly authorized corporate entities aimed at social entrepreneurs who seek to use the power of business to simultaneously achieve profit and social or environmental benefits. This Article highlights recent developments in the social enterprise movement in Europe and the United States and focuses on the emergence of a surprisingly broad range of newly authorized corporate entities on both continents in response to the needs of social entrepreneurs. These include social cooperatives and the community interest company in Europe, as well as the L3C, the flexible purpose corporation, the social purpose corporation, and the benefit corporation in the United States. In so doing, this Article emphasizes the truly international scope of the social enterprise movement and explains the growing divergence in approaches to social enterprise between continental Europe and the United States. This Article suggests that the benefit corporation, which imposes a new duty to consider stakeholder interests, is currently the most effective vehicle through which social entrepreneurs can ensure their blended value goals are being considered and achieved. This Article concludes by responding to critiques of profit-distribution in social enterprise, making the case for the benefit corporation, and suggesting some statutory and tax reforms to further foster the social enterprise revolution.


Cross-posted at Conglomerate.

This is my third and final substantive post comparing the Model Benefit Corporation Legislation (the “Model”) to the proposed Delaware Public Benefit Corporation (“PBC”) amendments.

“Branding” is one area where proponents of the Model may argue that the Model is better than the PBC.  As mentioned in my first substantive post, the PBC favors private ordering more than the Model, which makes the PBC more flexible, but also makes it more difficult to maintain a consistent brand.  Branding could be useful to investors, consumers, and governments that wish to quickly identify socially responsible companies.

Some proponents of the Model may point to the required annual report (PBC only requires a biennial report) and the requirement of measuring general public benefit against a third party standard (optional under the PBC) as building the Model’s brand.  In my opinion, however, neither the required annual report nor mandatory use of a third party standard is likely to facilitate creation of a useful brand under the current language of the Model.

First, the Model does not expressly provide an enforcement mechanism for assuring the public posting of an annual report and the use of a third party standard.  Currently, a number of benefit corporations are in violation of the statute, but nothing seems to be done about the violations.  Second, most of the few annual reports available are full of fluffy self-promotion and do not include much of value.  Third, the available third party standards vary wildly, so simply requiring a third party standard is not likely to lead to a consistent and valuable brand.  The updated version of the Model requires that the third party standard be “comprehensive,” “independent,” “credible,” and “transparent,” but those requirements will be difficult to enforce and, in any event, do not appear aimed at creating a consistent brand.  A benefit corporation that does not see the value in using a third party standard may use the lowest standard available, provide little to no useful information to the market, and waste company resources in the process.

If the Model proponents wished to create a brand via statute they would do better requiring an annual charitable giving floor and a partial asset lock, as I suggest here.  In my opinion, however, the heavy lifting in the branding department of social enterprise should be left to private organizations like B Lab.  The social enterprise space is evolving quickly, and I think it unlikely the state governments would keep up with the changes and engage in the type of enforcement needed to maintain a valuable brand.  Also, the term “social good” means very different things to different people, and therefore it is likely better to have private organizations develop various standards and allow the market to determine which standards, if any, are useful and valuable.


Cross-posted at Conglomerate.

One of my main criticisms of the Model Benefit Corporation Legislation (the “Model”) has been (and still is) the lack of guidance for directors. (See, e.g., here and here).  The Model requires directors to “consider” seven different stakeholder groups (§301(a)), and directs them to pursue “general public benefit” but does not provide any priorities to guide directors. (§§102, 201(a)).  The Model allows companies to choose one of more “specific public benefit purposes,” in addition to the “general public benefit purpose,” but does not require that any specific public benefit purpose be chosen. (§201(b)).

In contrast, Delaware’s proposal does require public benefit corporations (“PBCs”) to choose one or more specific public benefits (§362(a)), though the statute is not crystal clear on priorities and requires directors to “manage or direct the business and affairs of the public benefit corporation in a manner that balances [1] the pecuniary interests of the stockholders, [2] the best interests of those materially affected by the corporation’s conduct, and [3] the specific public benefit or public benefits identified in its certificate of incorporation.” (§365(a)) (emphasis added).   (As a side note, the PBC’s requirement to “balance” the stakeholder interests seems more onerous than the Model’s requirement to “consider” the interests.)

Even if directors’ duties are owed to the corporation as a whole, I suggest that clear priorities are important.  I attempted to explain the importance of priorities in my response to Professor Lynn Stout’s thought-provoking recent book:  The Shareholder Value Myth:

Professor Lynn Stout and others reject the need for a single metric and have argued that directors, like other human beings, balance the interest of various stakeholders.   Among other examples of balancing by human beings, Professor Stout points to the ability of people to balance work and family.   This article admits that directors do and should balance various stakeholder interests and does not argue for myopic focus on a single metric, but rather posits that clear corporate priorities can make that difficult balancing job easier.

Using Professor Stout’s work/family example of balancing can help illustrate the point.  Clearly defined priorities can help an individual make difficult decisions in the constant work/family balance.  If an individual prioritizes family over work, that obviously does not mean that every decision leads to direct, short-term benefits for the family.  For example, on occasion, that family-primacy individual will rightly choose to stay late at work and miss dinner.  While that individual decision may have seemed to prioritize work over family, viewed in the long-term, the family may benefit from the resultant career security.  Even if the long-term benefits do not actually come to fruition, most would agree that the individual should not be judged for her well-intentioned decision.

The fact that humans certainly balance interests of various constituents, however, does not mean that priorities are unimportant.  Priorities can help guide and can also provide weightings for the costs and benefits of any decision.   Also, priorities most clearly help in critical situations.   To continue with the work/family example, in a zero-sum game, how does one decide between work and family when the outcome of that decision is of critical importance to both?   If an individual has clearly stated that family is a higher priority than work, this critical decision is more easily answered.  Even if the priorities are not clearly stated, priorities will still drive the decision.  Transparency as to the priorities makes things clearer to all involved and makes it less likely that the individual will drift from his or her true priorities.   Similarly, directors would benefit from a clear corporate objective that includes specific corporate priorities.

While I would have preferred the proposed Delaware amendments to have made clear that the PBC’s top priority is its specific public benefit purpose, I think requiring PBCs to identify a specific public benefit purpose is a move in the right direction and likely to aid directors in decision making.

In my third and final post, on Delaware’s proposed amendments involving the PBC, I will talk about the social enterprise statutes and branding.


Simon Mainwaring (CEO of We First), Jay Coen Gilbert (Co-Founder of B Lab), and Dave Cobban (Director of Sustainable Business & Innovation for Nike) will host a live Google+ hangout on May 7, 2013 at 4pm eastern (1pm pacific).  You can RSVP for the free event here

The text of the announcement reads:

Join us live to discuss how business can become a force of good by partnering with customers to co-create lasting social impact. Submit your questions below or by tagging them with #ProfitToPurpose. Simon Mainwaring, CEO of We First and New York Times bestselling author, will lay out a new sustainable vision for purposeful capitalism. We First provides strategic consulting and training in storytelling and community building to brands like Coca-Cola, 3M, Livestrong and the X Prize Foundation. www.WeFirstWebinar.com.  Jay Coen Gilbert, Co-Founder of B Lab, will share how the +BCorporation movement is building a new sector of the economy. Encompassing more than 700 companies across 60 industries and in 26 nations, B Corps use the power of business to solve social and environmental problems. http://www.bcorporation.net Dave Cobban, Citizen Mobilization Director of Sustainable Business & Innovation of +Nike, will talk about his role and why Nike is focused on changing “the making of making” http://nikemakers.tumblr.com/. He’ll also give an inside look into Nike’s collaborative innovation approach and their partnership with NASA, USAID, and the US Department of State called LAUNCH www.launch.org.


Cross-posted at Conglomerate.

This is the first of three posts analyzing the proposed Delaware Public Benefit Corporation (“PBC”) amendments.  The posts will compare the proposed PBC amendments to the Model Benefit Corporation Legislation (the “Model”).

In a few key areas, the PBC allows more private ordering that the Model.  Perhaps the most striking difference is that the PBC does not require a third party standard for measuring public benefit (a cornerstone requirement of the Model) unless the requirement is included in the PBC’s certificate of incorporation or bylaws (§366(c)).  In some ways, Delaware’s approach in the benefit corporation debate reminds me of how it handled the proxy access debate:  expressly allow, but leave most of the details to the individual corporations.

That said, the PBC is not as flexible as the Flexible Purpose Corporation (“FPC”) (California) or the Social Purpose Corporation (“SPC”) (Washington); the PBC requires that the PBC be operated in a “responsible and sustainable manner” (§362(a)).  That broad general statement in the proposed PBC amendments, which is not present in the FPC or SPC statutes, seems to be one of the main reasons B Lab, the primary force behind the benefit corporation movement, has expressed public support for the PBC.  Whether B Lab is completely supportive of the PBC and all its deviations from the Model is not entirely clear.

Below, I compare and contrast some of the key provisions of the Delaware’s PBC and the Model.

Benefit Director.  PBC – not mentioned.  Model – required for public companies. (§302(a)).

Benefit Officer.  PBC – not mentioned.  Model – optional (§304(a)).

Benefit Report (Preparing).  PBC – no less than biennially (§366(b) & (c)).  Model – annually (§401(c)).

Benefit Report (Public Posting).  PBC – optional (§366(c)).   Model – required to post benefit report on company website; if no website must provide the benefit report for free to anyone who asks for a copy (§402).

Identification of Specific Public Benefit Purpose(s).  PBC – required (§362(a)).  Model – optional (§201(b)).

Minimum Ownership for Shareholder Standing in Derivative Lawsuits.  PBC – 2%; or if the PBC is publicly traded then the lesser of 2% and $2 million in market value (§367).  Model – 2% (§305(b)(2)(i)).

Third Party Standard.  PBC – optional (§366(c)).  Model – mandatory (§§102 & 402).

Third Party Certification.  PBC – optional (§366(c)).  Model – optional (§401(c)).

The only area above where the PBC is less flexible than the Model is in requiring the identification of specific public benefit purpose(s), which will be discussed in the next post on director guidance.


Thanks to Professor Brian Quinn (Boston College Law School) for sending the link to Richards, Layton & Finger’s (“RLF”) alert about public benefit corporation legislation in Delaware

The relevant portions of the RLF alert, about the proposed amendments to the Delaware General Corporation Law, are pasted below.  

Public Benefit Corporations

In a development that may be of significant interest to social entrepreneurs, the proposed legislation would add a new subchapter XV to the DGCL (Sections 361 through 368) to enable Delaware corporations to be incorporated as or, subject to certain restrictions, to become, “public benefit corporations.” Such corporations would remain subject to all other applicable provisions of the DGCL, except as modified or supplanted by the new subchapter.

In general, under the proposed legislation, a public benefit corporation would be a corporation managed in a manner that balances the stockholders’ pecuniary interests, the interests of those materially affected by the corporation’s conduct, and one or more public benefits identified in its certificate of incorporation. To this last point, each public benefit corporation would be required, in its certificate of incorporation, to identify itself as a public benefit corporation and to state the public benefits it intends to promote. The proposed legislation generally defines “public benefits” as positive effects (or minimization of negative effects) on persons, entities, communities or interests, including those of an artistic, charitable, cultural, economic, educational, literary, medical, religious, scientific or technological nature.

Central to the proposed new subchapter’s operation is the statutory mandate that would be imposed on directors. The new subchapter would provide that directors, in managing the business and affairs of the public benefit corporation, shall balance the pecuniary interests of the stockholders, the interests of those materially affected by the corporation’s conduct, and the identified public benefits. The new subchapter also would provide that directors shall not have any duty to any person solely on account of any interest in the public benefit and would provide that, where directors perform the balancing of interests described above, they will be deemed to have satisfied their fiduciary duties to stockholders and the corporation if their decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.

The new subchapter would impose special notice requirements on public benefit corporations, mandating periodic statements to stockholders regarding the corporation’s promotion and attainment of its public benefits. The new subchapter also would provide a means of enforcing the promotion of the public benefits. By statute, stockholders holding at least 2% of the corporation’s outstanding shares (or, in the case of listed companies, the lesser 2% of the outstanding shares or shares having at least $2 million in market value) would be able to maintain a derivative lawsuit to enforce specified requirements in the subchapter.

The new subchapter would contain limitations on the power of public benefit corporations to adopt amendments to their certificates of incorporation or effect mergers or consolidations if the effect would be to abandon their public benefit purpose. These limitations would be imposed through a 66 2/3% vote of each class of the public benefit corporation’s outstanding stock.

The new subchapter would also contain limitations on the power of corporations that are not public benefit corporations to amend their certificates of incorporation to become public benefit corporations or to effect mergers or consolidations that would result in their stockholders receiving shares in a public benefit corporation. These actions would require a 90% vote of each class of the corporation’s outstanding stock. New subchapter XV would also provide appraisal rights to any stockholder of a corporation that is not a public benefit corporation that, by virtue of an amendment to the corporation’s certificate of incorporation or any merger or consolidation, receives equity interests in a public benefit corporation. Corresponding changes to Section 262 of the DGCL, the appraisal section, would also be made.


LAW & SOCIETY │ 5/31/13 │ BOSTON, MA

A few days ago, Kyle Westaway asked: When will law schools start taking [social enterprise] seriously?

Well, on Friday May 31, 2013 at the Boston Sheraton Hotel (Room 05) from 4:30 p.m. until 6:15 p.m. the Law and Society Association will host a roundtable discussion at its annual meeting on corporate and tax law issues in the social enterprise space.

The participants in the Law & Society roundtable include the following law professors:

Alicia Plerhoples (Georgetown) (Chair), Dana Brakman Reiser (Brooklyn), Haskell Murray (Regent), and Marcia Narine (currently UMKC, but moving to St. Thomas (FL) in the fall).

The abstract from our proposal reads:

We propose a roundtable discussion session that will focus on corporate and tax law’s expansion to accommodate for-profit businesses’ pursuit of the social good. This session ties to the conference’s theme of investigating the economic downturn’s effect on law and society by exploring the ways in which the downturn has promoted a rapid acceleration of the social enterprise movement and an increased commitment to corporate sustainability methods. Sustainability is a complex goal that requires a multidisciplinary approach that necessarily involves economic actors—businesses. Social entrepreneurs as well as corporate leaders are considering some of the most pressing economic issues of our time related to sustainability. How will businesses operate given the increased global demand for natural resources, gross economic disparity and inequality, and climate change of the twenty-first century?

Our panel will discuss the ways in which corporate and tax law are being reconceived to address social and environmental problems. We will discuss the proliferation of so-called social enterprise legislation (i.e., the benefit corporation, L3C, flexible purpose corporation, etc.) that has been hailed as an innovative step forward in business, while also criticized as being untested, unnecessary, and even irresponsible. In addition to introducing the audience to the new social enterprise legislation, the panelists will debate the various criticisms of social enterprise generally, and the legislation specifically, and discuss social enterprise in the larger context of the social and environmental pressures on the global economy. We will also offer our thoughts on the future of the social enterprise movement.

This is the only one of many panels, symposia, and conferences over the past few years that has had focused on social enterprise law.  That said, I agree with Kyle that law schools are still lagging behind business schools in the social enterprise space.  As I mentioned in the comments to his post, some of this lag is due to the fact that the U.S. social enterprise statutes are only 5 or fewer years old and, to my knowledge, there has not been any litigation involving these new forms.   This semester, I am teaching a social enterprise law course at Regent University School of Law, and it has been a wonderful class to teach.  I know a number of my co-bloggers have also taught social enterprise law classes, including Cass Brewer (Georgia State), Alicia Plerhoples (Georgetown), Deborah Burand (Michigan), and even Kyle Westaway – who asked the opening question – has co-taught a short course in social enterprise law at Harvard Law School.  I am sure there are additional social enterprise law courses being offered, and I do think law schools will start taking social enterprise more seriously as the space evolves.