Substance over Symbolism: Do We Need Benefit Corporation Laws?

BY CHENG-CHI (KIRIN) CHANG.

Full essay here.

Benefit corporation laws have gained traction as mechanisms to integrate societal and environmental objectives into business operations, yet they are arguably superfluous within the existing legal framework. The prevailing belief that corporations must prioritize shareholder wealth above all is not a legal imperative, as evidenced by the flexibility of conventional corporate law and the protective scope of the business judgment rule. This paper argues that the statutes governing benefit corporations offer scant real-world protections or accountability and may inadvertently undermine corporate social responsibility by perpetuating misconceptions about the limitations of traditional corporations. The critique presented here is threefold: existing corporate law already allows for the pursuit of social agendas; benefit corporation laws provide illusory protections with vague language and lack robust enforcement mechanisms; and the statutes may invite misuse of the “benefit” designation, leading to potential abuse. The paper further contends that these laws may increase director liability, weaken shareholder rights, and inadvertently discourage responsible corporate behavior across the broader business landscape. In conclusion, this paper posits that benefit corporation laws are unnecessary and may yield negative unintended consequences. It advocates for leveraging existing legal structures and private certifications to advance corporate social responsibility, rather than relying on flawed state-sponsored benefit corporation legislation.