The Rise of the Benefit Corporation: Is this a Future for the Firm?

Quelle performance? : de l'efficacité sociale à l'entreprise citoyenne / sous la direction de Pierre-Emmanuel Moyse, Faculté de droit, Université McGill. Montréal : Les Éditions Thémis, 2013.

Posted: 29 Jan 2018 Last revised: 12 Feb 2018

See all articles by Richard Janda

Richard Janda

McGill University

Richard Lehun

Goethe University Frankfurt

Philip Duguay

Independent

Date Written: January 20, 2018

Abstract

As the chartered company evolved into the modern corporation, it shed itself of any imposed requirement to provide a public benefit. What had been a licence to operate with delegated authority for purposes designated by the state became an open invitation to pursue private advantage. The hollowing out of public purpose was arguably completed with the abandonment of the ultra vires doctrine at the end of the nineteenth century. With that change, corporate law no longer sought to maintain any control - as against the world - over the purposes being pursued by the corporation. It was only the shareholders in the corporation who would have recourse against their entity for failure by its directors and officers to pursue the purposes that had been held out by it. What the law determined to be of significance to third parties was the ability to rely on the corporation to act as a person in contractual relations without questioning whether the contract was properly motivated by the corporation's "internal" purposes. In other words, while a physical person's purposes and state of mind could be relevant in contract to establish a "meeting of the minds", a corporation's purposes were to remain private and thus assumed to be obvious: to make a profit however it best determined for itself. Thus, the corporation pursued internally established purposes so as to produce external effects in the world. Purpose came to be policed by the shareholders and the market for shares. In this sense, the corporation became shareholder-centric and externality-generating.

Suggested Citation

Janda, Richard and Lehun, Richard and Duguay, Philip, The Rise of the Benefit Corporation: Is this a Future for the Firm? (January 20, 2018). Quelle performance? : de l'efficacité sociale à l'entreprise citoyenne / sous la direction de Pierre-Emmanuel Moyse, Faculté de droit, Université McGill. Montréal : Les Éditions Thémis, 2013., Available at SSRN: https://ssrn.com/abstract=3106045

Richard Janda

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Richard Lehun (Contact Author)

Goethe University Frankfurt ( email )

Frankfurt
Germany

Philip Duguay

Independent ( email )

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