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Home Archive Volume 65 Volume 65, Issue 1 COMMENT: The Harms of the Benefit Corporation
COMMENT: The Harms of the Benefit Corporation

By Kennan Khatib | 65 Am. U. L. Rev. 151 (2015)

 

The benefit corporation cannot be ignored. To date, thirty states, including Delaware and the District of Columbia, have enacted benefit corporation legislation, signifying that the new legal status is here to stay. Largely established to quell the fears of entrepreneurs pursuing social and environmental objectives and profit, the benefit corporation appears to put an end to the legal uncertainty linked to the consideration of other constituencies irrespective of whether such consideration ultimately promotes shareholder value.

While many legal commentators have analyzed the initial impact and advantages of the benefit corporation, few have explored the ability of the existing traditional for-profit legal framework to accommodate for-profit, mission-driven companies. This Comment argues that, due to the increasingly accepted notion that profitability and the pursuit of social and environmental impact are no longer mutually exclusive concepts, the traditional for-profit framework permits social entrepreneurs to consider other constituencies in most contexts and that social entrepreneurs can effectively circumvent the contexts that bar such considerations when adequately counseled. This Comment also analyzes the new corporate form’s potential for abuse, suggesting that one of the core impetuses for the creation of the benefit corporation—abating greenwashing—may actually be exacerbated. While seemingly innocuous, the benefit corporation fosters a harmful dichotomy with traditional for-profits that encourages consumers to evaluate companies based on legal status instead of business practices.

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