What is a Constituency Statute?
But there’s more. There is the constituency statute.Through attending various talks, discussions, and CA State senate hearings on new legislation that would enable social entrepreneurship,the term “constituency statute” has come up multiple times. In searching for a good explanation for the concept of constituency statutes I came across an excellent law review article mapping the relationship between corporate law and social innovation principles by Anthony Bisconti titled, “The Double Bottom Line: Can Constituency Statutes Protect Socially Responsible Corporations Stuck in Revlon Land?” (Loyola Law Review, 2009)
So, what is a constituency statute?
A constituency statute, also called a stakeholder statute, allows corporate directors to consider non-shareholder interests when making business decisions.
Have all states passed constituency statutes?
No, but a majority of states have. As of 2009 (when Bisconti published his law review article) 32 states had passed some form of constituency statute.
Which states have enacted constituency statutes?
As listed in footnote 13, the following states have constituency statutes:
- Arizona
- Connecticut
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Minnesota
- Missouri
- Nebraska
- Nevada
- New Jersey
- New Mexico
- New York
- North Dakota
- Ohio
- Oregon
- Pennsylvania
- Rhode Island
- South Dakota
- Tennessee
- Vermont
- Virginia
- Wisconsin
- Wyoming
Trackbacks & Pingbacks
[…] The ice-cream maker could have fought the bid under a precursor to benefit corporation law–“constituency statutes” in Vermont that allow directors to consider non-shareholder interests. But, in the end, Ben […]
[…] for such state-based corporate doctrines (such as the duty of loyalty). These statutes, known as constituency statutes, essentially permit directors to consider, to varying degrees, nonshareholder interests when making […]
[…] statues produce more high-quality patents than those in 16 states lacking the statues. A constituency statue encourages corporate directors to consider non-shareholder (e.g., employees) interests when making […]
[…] In this world of incredible pressures to produce short-term profits, business leaders can become understandably skittish about taking a longer view that encourages both innovation and their company’s long-term health. With anxious stockholders demanding one dazzling quarterly report after another, and with the constant threat of hostile takeovers, it’s hard to devote the time and patience required to develop new products and services. To remedy this, 34 states in the U.S. have enacted little-known “constituency statutes.” […]
[…] and Wyoming have an older law on the books that some view as a substitute. It’s known as a non-shareholder constituency statute, and it explicitly permits corporate directors to consider the effects of their decisions on […]
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