St. Mary's Law Journal


Throughout American history a continuous call for businesses to wield their power and influence in such a way as to not only create economic value for shareholders, but also to create value in an ethical manner that benefits society as a whole has existed. Currently, many businesses respond to this call by integrating social responsibility into their operations. A recent innovation on this front is the development of the “benefit corporation” by the non-profit organization “B Lab.” The benefit corporation is essentially a hybrid entity. It is designed to have characteristics of both non-profit and for-profit entities. The entity also requires managers and directors of these entities to seek a “material positive impact on society and the environment” while generating a profit. The Benefit Corporation (B Corp) is a legal status conferrable by states recognizing it as a legal business form under some variation of the Model Benefit Corporation Legislation (MBCL) which B Lab promulgated. At the time of this writing, fourteen states and Washington, D.C. have either enacted some form of a benefit corporation statute or have introduced legislation to permit these entities. While MBCL’s intent is laudable, the inherent problems within its corporate governance structure make it ineffective. The benefit corporation fails as a useful legal structure. This is because it sets forth a general public benefit purpose but provides the parties most affected by this purpose with no corresponding effective method of enforcement. Additionally, this general public benefit purpose is vague, unquantifiable, and does not serve as an adequate objective for purposeful corporate action. By requiring managers to pursue multiple objectives and consider all stakeholders’ interests equally, the benefit corporation makes it more likely that none of these objectives will be fulfilled.


St. Mary's University School of Law