CALDERINI, M. & FIA, M. (2018). “Hybrid organizations and governance issues: a focus on benefit corporations” presented at the EURAM Conference 2018 under the track “Rethinking the Form, Governance & Legal Constitution of Corporations: Theoretical Issues & Social Stakes” co-sponsored by the Strategic Interest groups (SIGs) Business for Society and Corporate Governance.
In the last decade, new economic trends have emerged that aim to reconcile profit, which is the primary purpose of enterprises, with the achievement of social objectives that are beneficial for stakeholders, the community and society at large. The primary actors that incorporate these changes include hybrid organizations and particularly social enterprises, which are defined as organizations that incorporate blended missions (Brakman Reiser 2010, Santos 2012) and whose primary characteristic is reflected in the dual mission of achieving financial returns and realizing positive social returns.
Even if current laws potentially allow traditional corporations to pursue social goals, the standard P-A economic models have prevailed over legal doctrine, i.e., the concept of shareholder value maximization weakens the current incorporation modes as credible means for pursuing social missions. One of the most acknowledged drivers of the recent crisis is the blind profit-seeking motivating managers’ choices and shareholders’ short-term interests. Thus, the managerial liability, that drives the strategic choices of managers, and shareholders’ preferences and prerogatives are crucial elements for an enterprise to pursue social goals and more broadly, for considering its relationship with society.
In this context, Social Enterprises need specific legal protection. The emergence of new legal methods of incorporating, particularly, Benefit Corporations, may correct the dysfunctionality of the economic system caused by existing managerial culture. Benefit Corporations potentially provide a legal means to both immunize managers and directors that seek to pursue social goals, this in turn may attract social investors.