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Introduction to the Law of Corporations: Cases and Materials

Public Benefit Corporations

The development of corporate social responsibility and social entrepreneurship has given rise to demand for a different kind of corporate form, the “public benefit corporation”. The public benefit corporation is a for-profit corporation established with a specific public purpose. The certificate of incorporation of a public benefit corporation requires that incorporators specify some public benefit against which the pecuniary interests of the corporation's business must be balanced. Public benefit corporations as a specific form are a relatively new addition to corporate laws of states in response to a growing desire by promoters to have a corporate form that outwardly signals a credible commitment by managers to a more publicly-minded business. Although the form is relatively new, there is very little in the public benefit form that could not also be accomplished using a regular corporation.

In recent years, there has been a proliferation of public benefit corporations. For example, Ello, a Delaware public benefit corporation (social networking site), specifies as its public benefit that it will not share the private information of its customers with third parties. Plum Organics, another Delaware public benefit corporation (a baby food manufacturer), specifies that its public benefit includes “the delivery of nourishing, organic food to the nation's little ones.” Finally, Lemonade, PBC, a publicly-traded, Delaware public benefit corporation, specifies that its public benefit is to "harness novel business models, technologies and private-nonprofit partnerships to deliver insurance products where charitable giving is a core feature, for the benefit of communities and their common cause." 

As you work through the provisions of the public benefit corporation statute, notice that while the statute permits directors to explicitly work to further the corporation's stated public benefit, it does not permit beneficiaries of the stated public benefit to sue to enforce the benefit. So, where Plum Organics creates a stated benefit of "providing nourishing, organic food to the nation's little ones," the nation's little ones have no standing when it comes to enforcing that benefit.