“Profit, People, Planet” Perverted: Holding Benefit Corporations Accountable to Intended Beneficiaries

Abstract

For-profit social entrepreneurship is a steadily growing movement. As part of this movement, numerous states have enacted legislation authorizing the incorporation of benefit corporations, a new for-profit corporate form. In addition to generating profit for shareholders, benefit corporations must “create” a “public benefit.” The mandate that a for-profit corporation pursue a humanitarian cause in addition to generating profit is a significant departure from shareholder primacy: the maxim that the sole purpose of a corporation is to generate return on investment for its shareholders. Although this legislation is a necessary and progressive evolution in corporate law, the current benefit corporation form lacks meaningful accountability and oversight mechanisms. It does little to deter bad actors from taking advantage of socially conscious consumers willing to pay a premium for ethically sourced goods and services by incorporating and operating sham benefit corporations. This Note argues for amending benefit corporation legislation to allow state attorneys general to oversee the creation of public benefits. An oversight and enforcement mechanism would root out and deter bad actors from perverting the purpose of the benefit corporation form, and it would hold benefit corporations accountable to their intended beneficiaries.