Tag: social profit

Over the past three decades, legislators around the world have introduced legal frameworks for social profit companies. These are companies that commit, in their articles of association and/or through their company form or type, to pursue both the distribution of profits to shareholders and one or more social purposes. Because of their dual purpose, social profit companies are situated in the middle of a spectrum between purely for-profit companies and nonprofit organizations, which often pursue social purposes. In a world where environmental and other societal challenges are becoming increasingly urgent, this hybrid model holds great promise. Indeed, such companies could address said challenges by leveraging the scalability and access to capital associated with equity financing and the support from socially-minded investors, consumers, employees, business partners and/or governments. However, in pursuing both a social mission and profit distribution, social profit companies relinquish key characteristics that, in the dominant law and economics literature, are seen as essential to the success of both for-profit and nonprofit organizations. Without the pursuit of shareholder wealth as a single, measurable objective and without the nondistribution constraint which fosters trust among donors and customers, social profit companies require a distinct theoretical framework and set of legal strategies.

Continue reading “Social profit companies: toward a theoretical framework and adequate regulation”