This article analyzes social enterprise from a theoretical and comparative perspective. Social enterprises are distinct from nonprofits because they have equity-holders; they are distinct from socially minded for-profits because their mission is sacrosanct. We set out a regulatory template to support entities with this unique hybrid character. Only companies that commit to a mission-centric purpose, and adopt transparency and accountability mechanisms that police faithfulness to this commitment, would be entitled to call themselves “social enterprises.” This narrowly tailored regulatory structure would allow these firms to stand out and attract likeminded consumers and investors.
Neither the US nor the EU offers something like this. Social enterprises in the US may form as benefit corporations and obtain the related B Corp certification. These mechanisms, while laudable, fall short because they group socially minded firms and social enterprises together despite the important distinction between the two. Such conflation is not a problem in the EU. A number of EU countries have specific social-enterprise regulations. But the rules vary greatly. They also tend to define social enterprise too narrowly, fail to mandate appropriate governance structures, and lack transparency mandates. A proposed EU-wide rule would help harmonize the area, but it is too reliant on country-level rules to have a significant impact. Social enterprises on both continents would benefit from new rules that appreciate their unique role in the economy and hold them to their principles.
15 Ohio St. Bus. L.J. 1 (2021)