Regulating Social Enterprise
Dana Brakman Reiser
Posted Tuesday, April 11, 2017

Many of today’s entrepreneurs want to commit themselves and their enterprises to something other than a simple bottom line of maximizing value for owners. Instead, they devote their endeavors to more complex missions of pursuing social good while also generating profits. This impulse goes by many names and encompasses entities with varying product lines, business plans, techniques and metrics. For simplicity, this essay will refer to companies pursuing such dual missions as social enterprises. Social enterprises and their founders can make big claims. Some argue their businesses will be more sustainable than traditional for-profits because they consider not only profits, but also people and planet. Others suggest the efficiency and scalability social enterprises offer will help them solve social problems better than traditional nonprofit charities.

A mounting number of state legislatures appear convinced by these arguments. Since 2008, lawmakers across the country have enacted legislation enabling new and specialized forms of organization intended specifically to house social enterprises. The forms include “low-profit limited liability companies,” “benefit corporations,” “public benefit corporations,” “flexible purpose corporations,” and “social purpose corporations,” thus far, and others may be in the works. Although these organizational forms are still nascent, academics have begun to explore the unique challenges they pose for their fiduciaries, investors, and other constituencies. One major problem this work has identified is enforcement. Yet, the opportunity for state attorneys general (“AGs”) – tasked with enforcement in adjacent areas on the state level –– has mostly gone unaddressed. This essay concentrates on these forms, and considers what role state attorneys general might play in social enterprise regulation.