Pluralism in Corporate Form: Corporate Law and Benefit Corporations

Abstract

Shortcomings in contemporary corporate law and theory are usefully illuminated through the new corporate form known as a benefit or “B” Corporation. For example, deep confusion persists within traditional corporate law over the relationship of three core concepts – fiduciary duties, corporate purpose, and the corporation’s best interests. Conceptually, benefit corporations – which combine profit making (not maximizing) with a social purpose – move from a strict shareholder-centric toward a stakeholder-centric model of corporateness, but they still fail to advance a truly new “corporate,” mission-centric model and theory of corporateness. Instead, reflecting doctrinal and theory failures in corporate law generally, they embody an alloy of shareholder and stakeholder elements. This is true at the organizational level and the individual level of theory, with continuing failure to move beyond an individualistic, self-interested anthropology of business participants to one featuring pursuit of the larger common good.

Still, benefit corporations offer great potential. They usefully disrupt the current business landscape, and thus it is premature to conclude they will not play an important role, both culturally and intellectually. Benefit corporations closely resemble certain early American corporations that largely were formed to advance public-serving purposes, not just private gain, and thus, historically, they represent a return to early practices as well as a seeming ultra-modern innovation in corporate form. And they exemplify the growing phenomenon of institutional pluralism, in which a diverse array of organizations serves to mediate between the individual and the state, and to advance a variety of social goals, but without statist control. This pluralism is serving to overcome longstanding and overly stark dichotomies that simplistically categorize corporate activity (and actors) as either profit or nonprofit, and as either public or private. All in all, B Corps offer both a useful perspective on traditional corporate law and represent a potential breakthrough form for business activity, further diversifying the business law ecosystem.

Keywords: corporations, corporate law, benefit corporations, B Corporation