If you find yourself at a roundtable discussion about law, policy, and social innovation there is a good chance you will hear buzzwords like fiduciary duty, Dodge v. Ford, Revlon, maximizing shareholder wealth, legal structures, benefit corporations, flexible purpose corporations, and business judgment rule.Key in all of that will be an account of some of the historical happenings in corporate law and how they hammered out our understanding about the way corporations, as distinct legal entities, relate to the individuals who own them (i.e. shareholders).And somewhere in the narrative, there’s a good chance that the story of the sale of Ben and Jerry’s will come up.

SSIR Article about the Sale of Ben and Jerry’s

In the Fall 2012 issue of the Stanford Social Innovation Review, Indiana University Law professors Antony Page and Robert A. Katz address the story of Ben and Jerry’s in an eloquent article titled, “The Truth About Ben and Jerry’s” that recalls the history of the company and context of its eventual sale to Unilever, and the impact of the sale to the social entrepreneurial vibe of the ice cream company.

Related Innov8Social Posts

As you read the article you may be searching for further background on some of the topics raised and buzzwords mentioned. Here are a few Innov8Social articles that may help.


Is There Still a Role for New Legal Structures for Social Innovation?

The SSIR article leaves it to the reader to decide on whether new legal structures are necessary, and if so, to what extent such structures should strive to create a presence in each state. In an earlier post, I suggested that these new legal structures may serve to formalize a way of measuring double and triple bottom lines.

Whether you are an avid supporter of new legal structures for social innovation, or are on the side of using existing legal constructs to support social entrepreneurship, the article provides a valuable history of the sale and its context.  And, above all, it keeps the discussion alive. It is through discussion, debate, and action that we can impact law and policy, that impact social entrepreneurs, who are steadfast on changing the way business is done.

We have had a few posts on articles related to history and progress of the U.S. legal infrastructure supporting  social innovation. This includes a look at U.S. case law that articulated the duty of a corporation’s board of directors to maximize shareholder wealth. And the buffer provided by the Business Judgment Rule (BJR) that protects court interference with a board’s decisions so long as certain criteria are met.

constituency statutesBut 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:

  1. Arizona
  2. Connecticut
  3. Florida
  4. Georgia
  5. Hawaii
  6. Idaho
  7. Illinois
  8. Indiana
  9. Iowa
  10. Kentucky
  11. Louisiana
  12. Maine
  13. Maryland
  14. Massachusetts
  15. Minnesota
  16. Missouri
  17. Nebraska
  18. Nevada
  19. New Jersey
  20. New Mexico
  21. New York
  22. North Dakota
  23. Ohio
  24. Oregon
  25. Pennsylvania
  26. Rhode Island
  27. South Dakota
  28. Tennessee
  29. Vermont
  30. Virginia
  31. Wisconsin
  32. Wyoming