Kevin V. Tu
84 Geo. Wash. L. Rev. 121
The normative debate as to whether corporations should operate with the singular objective of maximizing shareholder wealth or broader societal obligations may never be settled. Even so, the growth of socially conscious corporations—that seek to create shareholder profit while advancing social missions—highlights a contemporary legal issue facing corporate directors and shareholders. Can the directors of a for-profit corporation elect to pursue these dual objectives without running afoul of their fiduciary duty of loyalty? If so, to what extent may the directors of a for-profit corporation pursue social missions (or objectives other than those intended to directly increase shareholder profit)?
Because of uncertainty surrounding the ability of existing business entities to accommodate the dual objectives of socially conscious corporations, many states have created Benefit Corporations as a new type of business entity under state law. This Article explores the widespread enactment of Benefit Corporation statutes as a mechanism for facilitating the dual objectives of socially conscious corporations. Specifically, it considers the need and rationale for adding Benefit Corporations. Ultimately, this Article contends that the discussion about Benefit Corporations has been overly focused on the need for Benefit Corporations. As a result, the broader impact of Benefit Corporations on existing business entities and the viability of alternatives to adding a new business entity have been neglected. In the end, this Article concludes that the creation of an efficient legal environment requires a deeper understanding of the potentially negative impact of Benefit Corporation, and the resolution of a foundational question left unanswered by Benefit Corporation statutes— namely whether and to what extent for-profit corporations can pursue both shareholder profit and social missions.
