Delaware Public Benefit Corporations 90 Days Out : Who's Opting In?

The Delaware legislature recently surprised the sustainable business and social enterprise sector. On August 1, 2013, amendments to the Delaware General Corporation Law became effective, allowing entities to incorporate as a public benefit corporation, a new hybrid corporate form that requires managers to balance shareholders' financial interests with the best interests of stakeholders materially affected by the corporation's conduct, and to produce a public benefit. For a state that has long ruled U.S. corporate law and whose judiciary has frequently invoked shareholder primacy, the adoption of the public benefit corporation form has been hailed as a victory by sustainable business and social enterprise proponents. And yet, the significance of this victory in Delaware is premature. Information about the number and types of companies opting into the public benefit corporation form has been cursory and speculative. This article fills that gap. In this article, I present new empirical research on the 55 public benefit corporations that incorporated or converted in Delaware within the first three months of the amended corporate statute's effective date. Based on publicly available documents and information, I analyze these first public benefit corporations with respect to the following characteristics: (1) year of incorporation as a proxy for corporate age, (2) industry, (3) charitable activities, (4) identified specific public benefit, and (5) adoption of model legislation options not required by the Delaware statute. My analysis returns the following results: 74% of public benefit corporations are new corporations in early stages of operation; 31% of public benefit corporations provide professional services (e.g., consulting, legal, financial, architectural design); the technology and education sectors each represent 11% of public benefit corporations; 10% of public benefit corporations produce consumer retail products; 9% are engaged in the healthcare sector; 35% of public benefit corporations could have alternatively incorporated as a charitable nonprofit exempt from federal income tax. This article discusses these and other findings to assist in understanding the public benefit corporation and how it has been employed within the first three months of its adoption