Sustaining the Sustainable Corporation: Benefit Corporations and the Viability of Going Public
Citation: 104 Geo L.J. 171 (2015)
The Delaware public benefit corporation is a relatively new for-profit legal entity that allows for the explicit pursuit of a corporate social or environmental mission. The public benefit corporation requires its directors and managers to balance the interests of its shareholders and beneficiaries of its corporate social or environmental mission. These competing interests implicate the shareholder wealth maximization norm, throwing directors’ legal obligations into question. Critics of the public benefit corporate form argue that the fiduciary duties created by the public benefit corporation statute conflict with traditional common law fiduciary duties; namely, that the duty to maximize shareholder value cannot legally coexist with the duty to consider the interests of other constituents. Supporters argue that in practice the shareholder wealth maximization norm does not conflict with a director’s fiduciary duties because Delaware law already supports the notion that directors may consider non-shareholder constituent interests in making both day-to-day and anti-takeover corporate decisions.
Because public benefit corporations are only increasing in number, and demand for their products and services is growing, addressing these questions is critically important. It is only a matter of time before a benefit corporation looks to tap into the resources of the public capital markets; but is there enough investor interest in public benefit corporations to support an IPO? After a public benefit corporation goes public, its directors owe significant obligations to the corporation’s shareholders and constituents—obligations that might be in tension with one another. Thus, can a public benefit corporation legally be a public company under current Delaware law? And fearing the violation of their fiduciary duties, public benefit corporation directors may believe they are unable to defend against activist investors and hostile takeovers; thus, can a public benefit corporation survive as a public and independent company? . . .