This article calls for harmonizing state law legislation on social enterprises, due to the potential discrepancy between the various states on the nature and legal structure of social enterprises. Since 2008, legislators in thirty-five (35) states across the United States of America and the District of Columbia, have enacted some form of innovative social enterprise legislation. This new revolution in corporate law is called social entrepreneurship, mirroring social movements in the aftermath of the 2008 financial crisis. Public opinion has led to a shift in prevalent corporate governance theory, from current share-holder centric corporate governance to collaborative corporate governance. A new generation of entrepreneurs, corporations, shareholders and other stakeholders now work together to resist short-termism, achieve long-term value, and incorporate in their charters a deep obligation to act for the benefit of society at large.
These developments are new, and to date there is no established body of precedent that judges, entrepreneurs, managers, board of directors or legal counsel can rely upon to make day-to-day decisions, as well as interpret and elucidate the governing laws. Accordingly, there will likely be different statutory interpretations of the nature and legal structure of a social enterprise by the different jurisdiction's courts. Courts will be faced with determining what constitutes a social enterprise, when there is no agreed upon definition of what it means. Furthermore, a review of current literature on social entrepreneurship reveals ill-defined, fragmented, and incoherent theoretical terms of social enterprise and social entrepreneur. Harmonization of social entrepreneurship law is extremely important because of the prevalence of commercial and other public benefit transactions that extend beyond state borders.
This article attempts to bridge the research gap, and propose a simple, inclusive, coherent and unified test that the courts, regardless of the jurisdiction, can use to determine what constitutes a social enterprise, while allowing flexibility to the various jurisdictions to tailor the language in the test to meet their unique needs and preferences. One of the elements of the “social enterprise” test centers on the identity of the founder, i.e., the social entrepreneur. Since it is not clear who is a social entrepreneur, this article will also propose a test to determine whether the founder of the entity is indeed a social entrepreneur or merely a social activist. Justice Sandra Day O’Connor’s iCivics example is used to illustrate the elements in the test for branding a “social entrepreneur.” It presents the Justice in a new light as an iconic American social entrepreneur and a pioneer of the civics education digital game-based learning.
Social Entrepreneurship, Entrepreneurship, Corporate Governance, Corporate Law, Policy, Legislation
Place of Original Publication
University of Pennsylvania Journal of Business Law
20 J. Bus. L. 520 (2018)
Alon-Beck, Anat, "The Law of Social Entrepreneurship – Creating Shared Value through the Lens of Sandra Day O’Connor’s iCivics" (2018). Faculty Publications. 2046.