Monday, November 30, 2009

"Social Enterprises"

My law school colleagues Rob Katz and Antony Page made a very interesting presentation today at the Workshop in Political Theory and Policy Analysis in Bloomington on the place of so-called "social enterprises" in the American system of corporate organization. These "social enterprises" claim missions beyond maximizing profits, such as supplying public goods that are not supplied either by for-profit enterprises or government agencies. But, Katz and Page argue, "social enterprises" do not fit comfortably into existing categories of for-profit or non-profit organizations, and require new legal rules to facilitate their activities. I tend to agree, but I see a tremendous line-drawing problem. After all, every for-profit enterprise creates social value by contributing the the tax base, creating jobs, training workers, etc. What seems to differentiate "social enterprises" is the explicit social mission. Unlike non-profit corporations, social enterprises seek   revenues primarily from sales of goods or services, rather than donations; but unlike for-profit enterprises, they seek profit not as an end in itself but as a means to accomplish whatever social mission the corporate officers articulate. Normally, for-profit corporations can only engage in social missions through a distinct entity, such as a foundation. That is why, according to Katz and Page, "social enterprises" require a distinct set of rules to facilitate their activities.

Just what those rules should be, and how they might be structured to prevent strategic manipulation by for-profit corporations acting like "social enterprises," are issues Katz and Page are still working to address. The problem of manipulation is potentially massive. I'll be interested to see where Katz and Page end up with this project. As soon as they post a paper on SSRN, I'll link to it.

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