Social Enterprise Innovation: Delaware's Public Benefit Corporation Law

Abstract

In 2010, to a Philadelphia audience, B Lab co-founder Jay Coen Gilbert claimed that “our capitalist system is not serving society; it’s serving shareholders” and stated that “we can’t run around expecting different outcomes until we change the rules of the game.” Since Gilbert’s talk in 2010, B Lab has been active. Not only has the non-profit organization privately certified over 900 companies as socially responsible, but B Lab has also taken the lead in convincing more than twenty states and the District of Columbia to pass benefit corporation statutes, in Mr. Gilbert’s words, “chang[ing] the rules of the game.”

Most states have based their benefit corporation statutes on the Model Benefit Corporation Legislation (the “Model”), a model statute drafted by Drinker Biddle attorney Bill Clark who has worked with B Lab in their efforts. After eighteen months of lobbying and negotiating, B Lab even convinced Delaware, the recognized pacesetter in U.S. corporate law, to amend its corporate statute. Delaware, however, established its own version of the benefit corporation law. While most of the other states adhere closely to the Model, Delaware seems to have merely consulted the Model and created a new social enterprise form called a “public benefit corporation” (PBC). This Article builds on the author’s previous work on benefit corporations, compares the Model and the PBC law, and offers suggestions for improving both legal frameworks.

Keywords: Social enterprise, social entrepreneurship, social innovation, public benefit corporations, B Lab, GIIRS, corporate governance, environment, society, Delaware

JEL Classification: M13, M14, K20, K22