Explaining the adoption of benefit corporation laws by the US states

Research output: Contribution to journalArticle

Abstract

Purpose: Over half of the US states have jettisoned an exclusive focus on profit maximization for shareholders and created new corporate structures, called “benefit corporations”, which give equal standing to the achievement of social and environmental objectives. This paper aims to examine the factors leading to adoption of legislation for the business formation of benefit corporations by the US states. Design/methodology/approach: Event History Analysis (EHA), a time-series technique using panel data of non-repeatable events, is used to identify and understand economic, political and diffusion factors that affect the adoption of benefit corporation enabling legislation in the US states. Findings: The results strongly indicate that politics matters – states in which the Democratic Party or liberal ideology controls governmental functions are more likely to pass these laws. There is also evidence that states that are more innovative in their approach to policy-making are more likely to adopt these laws. Otherwise, unemployment, tax burden, political culture, enacted constituency statutes and geographic diffusion have no discernible relationship with the adoption of benefit corporation laws. Practical implications: The paper provides warning signs to firms considering expending costly resources on the establishment of or conversion to benefit corporation status and the related investment in developing skills for the preparation, review and assurance of required annual benefit corporation reporting. Originality/value: The findings suggest future adoption of benefit corporation enabling laws may slow considerably.

Original languageEnglish (US)
Pages (from-to)351-368
Number of pages18
JournalJournal of Financial Economic Policy
Volume10
Issue number3
DOIs
StatePublished - Aug 6 2018

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U.S. States
Factors
Legislation
Business formation
Tax burden
Political culture
Ideology
Event history analysis
Design methodology
Unemployment
Shareholders
Corporate structure
Assurance
Preparation
Political economics
Statute
Warning
Resources
Policy making
Profit maximization

Keywords

  • B-corps
  • Benefit corporations
  • Corporate governance
  • Corporate social responsibility
  • Corporation and securities law
  • Event history analysis
  • Government policy and regulation
  • Policy coordination
  • Social responsibility
  • State policy
  • Sustainability and accounting

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Explaining the adoption of benefit corporation laws by the US states. / Murray, Susan M.

In: Journal of Financial Economic Policy, Vol. 10, No. 3, 06.08.2018, p. 351-368.

Research output: Contribution to journalArticle

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