THE CORROSION CRITIQUE OF BENEFIT CORPORATIONS

This Article evaluates what it labels the corrosion critique of benefit corporation statutes. These statutes have emerged as the new leading statutory alternative to enable and encourage social enterprises. Some supporters of social enterprises have criticized benefit corporation statutes, arguing that they create a mistaken impression that companies organized under ordinary corporation statutes must focus exclusively on pursuing profits as their ultimate goal. This corrosive effect on the understanding of most corporations may impede the adoption of socially responsible behavior. This Article examines the validity of the corrosion critique. It delivers a mixed verdict. The critique is valid in states with corporate constituency statutes but not other states, most significantly Delaware. The problem is that benefit corporation statutes have been widely understood as justified in order to enable social enterprises to consider stakeholder interests. That enabling justification is (partially) subject to the corrosion critique because its implication that ordinary corporations must ultimately focus on profits for shareholders is false in states with constituency statutes, but true elsewhere. But if benefit corporations are useful, it is because they offer social enterprises a way to brand themselves by committing to the pursuit of stakeholder interests, not because they simply enable companies to consider those interests. Advocates of benefit corporations should focus on this branding justification.