Briana Cummings, ‘Benefit Corporations: How to Enforce a Mandate to Protect the Public Interest’

ABSTRACT
A new trend has emerged within the past decade: corporations that seek to turn a profit while affirmatively promoting the public interest. To accommodate this trend, six states have recently enacted legislation creating the benefit corporation, a for-profit entity that is legally obligated to promote both a ‘specific public benefit’ of its choosing and the ‘general public benefit’.

Of all the legal and practical challenges facing successful implementation of this new legislation, perhaps the trickiest – and most important – is the need to ensure accountability to this public purpose mandate. This Note argues that the principal components of the accountability scheme adopted by benefit corporation legislation – (1) certification from an independent third party and (2) annual reports to the public – are ill-suited to the regulation of social welfare objectives. Drawing on lessons learned from the use of similar top-down regulatory mechanisms in corporate, nonprofit, and government contexts, this Note explains why the addition of bottom-up and horizontal mechanisms for ‘mission accountability’ may help foster the capacity and internal motivation necessary for benefit corporations to achieve their public benefit obligations.

Cummings, Briana, Benefit Corporations: How to Enforce a Mandate to Protect the Public Interest (April 11, 2012). Columbia Law Review, volume 112, no 3, 2012.

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