New Hybrid Business in the US

Nicole ALIX

Social economy manager

Extract of “Do EU legislation and economic policies act in concert in developing
a harmonised business theory for social economy and social enterprise?”
A European review from 1990 to 2011

Some advocate an even more structured approach, and propose updating corporate law, as in the USA, in order give a clear role to investors. Lindsay M. Baghramyan observes that it was at a September 2006 meeting (“Exploring New Legal Forms and Tax Structures for Social Enterprise Organizations” sponsored by the Aspen Institute, which is a major investor) that the participants discussed whether new legal vehicles are needed or whether existing laws may be used with some adjustments. In ‘for-profit’ organisations, the directors have a duty to act in shareholders’ interest.
Too frequently this prioritises profit over capital growth and directors must comply. This explains why, following Milton Friedman’s critique of ‘Corporate Social Responsibility’ (NY Times, 1970), several US States decided in the 1980s to adopt new laws known as ‘constituency statutes’, which codify the right (or obligation) of directors to consider interests other than shareholder interests. Celia Taylor clarifies the debate on the possibility of creating new legal forms for social enterprises. She describes ‘B corporations’ (the B stands for benefit or beneficial) as corporations that choose to qualify under a certification system that designates them as socially responsible to consumers and investors. To obtain certification (which is granted by ‘B Lab’, an organisation that takes one tenth of one per cent of corporate revenue and measures social performance), a corporation must be incorporated in a US State that has adopted a ‘constituency statute’ law. The corporation by-laws must stipulate explicitly that directors must consider the interests of employees, the community and the environment.
After the failure of Ben & Jerry’s, which fell victim to a takeover by Unilever, the provisions relating to B corporations were revealed as inadequate.
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