1 Introduction

Public interest and, more generally, ‘altruistic’ interests have been traditionally pursued by the state and non-profit entities. In the last decades, their effort has been supplemented by the activity of for-profit companies as part of their corporate social responsibility (CSR) programs and, in particular, their corporate philanthropy programs.

Nowadays, under the pressure of international organisations,Footnote 1 the issue of sustainability is not just at the heart of the political agenda of governments around the world but also at the centre of the debate on corporate governance of business companies due to the recognition of their essential role in the creation of equitable and sustainable economic growth.

Looking at the Western legal systems, over the past few decades, the United States, responding to the discussion on businesses’ sustainability, has seen the birth of new ‘hybrid’ organisational forms, capable of bringing together social and environmental aims with the business approach.Footnote 2 Among them, the most widespread is the benefit corporation,Footnote 3 which is reflected in more comprehensive legislation and which is currently enacted by 37 US jurisdictions. Actually, the political and legal debate over new forms of ‘stakeholder capitalism’ continues to be fervent.Footnote 4 For instance, in August 2018, Senator Elizabeth Warren introduced the bill for the ‘Accountable Capitalism Act’,Footnote 5 which would require every corporation with more than $1 billion in annual revenue to become federally chartered as a ‘United States corporation’ and to essentially adopt a model similar to that of a benefit corporation.Footnote 6

In Europe, the growing importance of sustainability and its perception as an added value for profit-making companies has triggered an intense activity of revising and updating the European rules applicable to financial markets and company law. In particular, from the initial promotion of voluntary CSR programs through the development of soft law instruments such as the European Strategy on Corporate Social Responsibility,Footnote 7 the focus has shifted to the introduction of mandatory rules encouraging the adoption of sustainable business practices. This includes the Directive on non-financial reporting,Footnote 8 the Directive on the encouragement of long-term shareholder engagement,Footnote 9 the Regulation on sustainability‐related disclosure in the financial services sector,Footnote 10 and the recent Regulation on the establishment of a framework to facilitate sustainable investment.Footnote 11 Moreover, a directive on supply chain due diligenceFootnote 12 as well as one on directors’ duties and sustainable corporate governanceFootnote 13 are currently under consideration by the EU institutions.

Regarding the latter, the preparatory study on directors’ duties and sustainable corporate governance commissioned by the European Commission (the ‘EY Study’)Footnote 14 has been strongly criticised by famous corporate law scholars for, amongst others, failing to define the problem correctly and address the relevant academic research.Footnote 15 Leaving aside the various criticisms of the study and its regulatory proposals, which also comprise the integration of sustainability into the business strategy and the extension of directors’ duties to include the interests of stakeholders other than shareholders, what is relevant here is that the issue of businesses’ sustainability is currently at the heart of the corporate law debate at the European level.

In Italy, such debate became more intense after the legal transplant of the US benefit corporation model in late 2015.Footnote 16 The Italian società benefit hybrid model, like the benefit corporation model, allows, through a voluntary choice of the founding members or the shareholders’ meeting, to internalise values typical of corporate social responsibility in the articles of association (in the company’s purpose clause), making them legally binding on the company and the directors. The direct consequence of this is the integration of sustainability aspects into the business strategy (as also proposed by the EY StudyFootnote 17) and the company’s commitment to creating not only value for its shareholders but also shared value, or so-called public benefit (‘beneficio comune’).Footnote 18

Similar hybrid models have been introduced in other countries, such as in Latin America, in particular Colombia, Ecuador and Peru (‘Sociedades de Beneficio e Interés Colectivo’), in British Columbia (Canada) (‘benefit company’), and in France (‘entreprise à mission’), while bills are pending introduction in several countries.Footnote 19

From a European perspective, the path followed by the Italian and French legal systems seems to be consistent with the recent European Union initiatives aimed at a more comprehensive protection of stakeholders’ interests in for-profit entities and at fostering the development of sustainable corporate governance.

Considering the traditional dichotomy between the pursuit of self‐interest purposes by for-profit entities on the one side, and the pursuit of altruistic purposes by non-profit entities on the other, hybrid models entering the emerging fourth sector of the economy, such as the benefit corporation, appear to struggle in finding an adequate space within capitalist systems and corporate governance theories.

This study attempts to offer an interpretative key for understanding these hybrid models, abandoning the classical homo economicus paradigm to embrace a reading based on behavioural law and economics and the Yale approach to economic analysis of law, according to which altruism and beneficence should be considered as ends in themselves, as goods desired by people and for which they are willing to pay a price.

In this line of reasoning, benefit corporations and other hybrid models, because of their ability to bring altruistic values into the corporate purpose, departing from shareholder value maximisation as the raison d'être of the corporate form, can be considered as a further manifestation of ‘firm altruism’, given that they are characterised by a deep and lasting impact on the environment and civil society.

2 The Dichotomy Between For-profit and Non-profit Entities: Self-Interest Purpose v. Altruistic Purpose

In 1759, Adam Smith, in his first book ‘The Theory of Moral Sentiments’, stated:

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.Footnote 20

It is interesting to note how the author who is considered the father of modern economics and capitalism and whose philosophy is based on the concepts of self-interest and maximising return, discussed the existence of charity, human ethics, and beneficence (or altruism).Footnote 21

From the economic theory perspective, the business corporation developed in capitalist systems on the one hand, and the concept of altruism on the other, seem—prima facie—to belong to sharply contrasting spheres, especially if one looks at the birth of the business corporation and its traditional function.

Business corporations are organisations whose primary goal is to jointly carry out an economic activity with the aim of making a profit (so-called objective profit) and to distribute the earnings among the owners of the enterprise (so-called subjective profit).Footnote 22

Currently, the predominant model accepted by corporate law in the major legal systems belonging to the Western legal tradition is the ‘shareholder primacy’ model,Footnote 23 even though the pursuit of some form of ‘public interest’ was one of the core elements of business corporations since their birth as chartered companies.Footnote 24

The development of the modern corporate governance debate stemmed from the dialogue between Dodd and Berle in the thirties of the nineteenth century, in which are rooted the opposite models of ‘stakeholder primacy’ (based on the assumption that directors have to balance the interests of all constituents of companies and behave in a socially responsible manner) and ‘shareholder primacy’ (based on the assumption that directors should run the company in the sole interest of shareholders).Footnote 25

The contractarian theory of corporate law proposed by, among others, Berle and MeansFootnote 26 has prevailed and, notwithstanding the birth of new theories such as stakeholderism,Footnote 27 communitarianismFootnote 28 or the enlightened shareholder value,Footnote 29 the shareholder primacy modelFootnote 30 has become the most widespread corporate governance regime. Moreover, the growth of the role of the capital market in the economy and the consequent financialisation of corporate law have strengthened the paradigm of the maximisation of shareholder value (MSV) as the fundamental objective of business activity.

Therefore, business corporations are characterised by a self‐interest purpose—materialised in the maximisation of profits and their distribution to the shareholders—which is antithetical to altruism, intended as any behaviour designed to increase another person’s welfare and which does not seem to provide a direct reward to the person who performs such behaviour.Footnote 31

Looking at the empirical reality through the lens of the economic analysis of law (EAL), it can be observed that the self‐interest model of the business corporation sticks perfectly to the homo economicus paradigm of neoclassical economics according to which human beings are rational and selfish actors, focused entirely on maximising their own material well-being.Footnote 32

Nonetheless, the empirical evidence demonstrates the existence, in fact, of altruism and beneficence, as well as that of other organisational forms—the non-profit entities—which are characterised by an altruistic purpose (i.e., the reinvestment of profits into the specific public benefit pursued) and a typical structure based on the non-distribution constraint.Footnote 33

The observation of reality shows that the unselfish prosocial behaviour, which seems to depart from the homo economicus model and the rational choice theory, is very common in human social life (as also demonstrated by several social dilemma experiments).Footnote 34

3 Altruism as an ‘End in Itself’

Once we accept the rational choice theory (according to which individuals build their choices through a cost-benefit analysis with a view to maximising the utility expected by them)Footnote 35 as well as the conception of the individual as a ‘maximising individual’ that is typical of neoliberalism,Footnote 36 it appears difficult to justify those human conducts that are led by altruistic and disinterested behaviours. Consequently, unselfish actions of individuals are considered as a sort of deviation from the paradigm of rational behaviour.Footnote 37

That being so, how to explain ‘the daily dynamics of gratuitousness and selflessness’,Footnote 38 the existence of altruism, charity and not-for-profit organisations (seeing that for-profit companies are supposed to be more efficient, from the economic analysis of law perspective, in the production of goods and services)?Footnote 39 How to explain the existence of altruistic behaviour, looking at the phenomenon through the inflexible lenses of the economic analysis of law and the neoclassical economics that identify in the homo economicus the paradigm of the individual to be taken as normative model?Footnote 40

The observation of empirical reality therefore seems to suggest the need for re-thinking the behavioural paradigm of the homo economicus, intended as the expression of the industrial revolution and utilitarianism, ‘that cannot be universalised neither in space nor in time’Footnote 41 and that is not apt to explain the inclination towards altruism and cooperation that is, to the contrary, a fundamental and universal aspect of human behaviour, as much as selfish conduct and the pursuit of material well-being.Footnote 42

In this sense, new behavioural models suitable for explaining the physical and juridical world can be found in the studies of behavioural law and economics, aimed at highlighting the cognitive variables within the decision-making processes of individualsFootnote 43 and the reasons underlying human behaviours,Footnote 44 as well as in the ‘multi-faceted approach’ to juridical phenomena that is typical of the Yale School of economic analysis of law (the so-called ‘law & economics’).Footnote 45

With regard to the latter, an impressive starting point for the reconstruction of the phenomena of altruism and beneficence, useful for our purposes, is offered by a recent contribution of Guido Calabresi.Footnote 46 According to this author, altruism, beneficence and similar values exist in the empirical reality not simply as ‘means’ for the production of goods and services, but also because they constitute ‘ends in themselves’, they are desired as ‘goods in and of themselves’ to satisfy the desire for which individuals are willing to pay a priceFootnote 47.

Hence, if we look at altruism and similar values as goods in and of themselves, desired by individuals, their existence cannot be deemed irrational merely because it does not correspond to the behavioural model of the homo economicus typical of the neoclassical economics.

Likewise, the existence of altruistic behaviours must not be deemed irrational only because they do not respond, according to the so-called McKean paradox,Footnote 48 to the canonical structures of market and command employed in economic theory for the optimisation of production.Footnote 49

In fact, if, on the one hand, the use of pure market or pure command incentives can destroy altruism or charity,Footnote 50 there are, on the other hand, in the empirical reality, different forms of modified market and modified command that do not destroy charity and altruism, but quite the opposite, they are the most effective in optimising—indirectly—their production through the creation of a culture of altruism and the education in altruism.Footnote 51

In his analysis of altruism, beneficence, and non-profit institutions, Calabresi also underlines how individuals’ need for altruism as a good in and of itselfFootnote 52 shows itself in several forms: the desire for individual altruistic behaviour (private altruism), altruistic behaviour by the state (public altruism) and altruistic behaviour by private firms (firm altruism). In this last case, it can take the form of not-for-profit companies and as philanthropic activity undertaken by for-profit companies.Footnote 53

4 Philanthropy and the For-profit Corporation

From the perspective of for-profit companies, traditionally, the answer to the request for firm altruism has been ‘corporate philanthropy’ activities and programs.

According to accounting literature, philanthropy (or ‘contribution’) can be described as ‘an unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner’, or as an ‘unconditional promise to give’ those assets in the future.Footnote 54

Broadly speaking, corporate philanthropy consists in supporting beneficial causes and in achieving a positive social impact through contributions in cash or in kind (e.g., employee time, facilities, or products and services produced by the firm). In most cases, philanthropy results in financial contributions by companies to causes that are intended to promote the welfare of others and bring about social change. These donations can be handled directly by the company or through a foundation established and controlled by the company itself.

With the development of corporate social responsibility (CSR), philanthropy has now often become part of modern CSR programs.

In the past several decades, CSR has been the focus of the debate over the relationship between business and society. Dozens of definitions of corporate social responsibility have arisen since the 1950s. According to Carroll’s famous four-part definition, CSR encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organisations at a given point in time,Footnote 55 while philanthropy ‘encompasses those corporate actions that are in response to society’s expectation that businesses be good corporate citizens’.Footnote 56

Notwithstanding the many attempts to define it, CSR remains an overarching concept. It can be described as a corporation’s voluntary, self-regulatory initiative to assess and take responsibility for the company’s effects on environmental and social well-being, going beyond law requirements.

CSR differs from traditional philanthropy because it goes a step further by directly involving the corporation’s business model and business practices, in an effort to mitigate the potentially negative externalities resulting from the corporate activity. What they share, is the possible positive impact on the organisation’s brand image and the bottom line,Footnote 57 as well as their voluntary nature.

5 A New Desire for Firm Altruism

In the last decade, especially due to the financial crisis, increased inequality, ethics-based corporate scandals, and the rise of awareness of climate change risks, a profound reconsideration of the current economy and the capitalist system has begun, pointing to the need for a broader and deeper involvement of companies in generating a positive impact on the environment and society.

The failure of the dominant neoclassical economic paradigms and the need for rethinking the concepts of firm and entrepreneur are by now issues that are supported by many economistsFootnote 58 and that recall the ancient tradition of the Italian ‘economia civile’ developed by Vico and Genovesi in the eighteenth century.Footnote 59

The idea of corporations not only as a tool for maximising shareholders’ profits but also as an essential means for the resolution of social and environmental problems has spread, basically increasing and strengthening the demand for firm altruism.

Nowadays, many voices are supporting the cultural transition from the shareholders’ capitalism model to a new form of stakeholders’ capitalism. Among them, it is worth mentioning the proposals offered by the Catholic social doctrine through Pope Benedict’s encyclical Caritas in veritateFootnote 60 and Pope Francis’ landmark encyclical Laudato sì Footnote 61 in which the predominant paradigm of profit maximisation is placed in doubt in favour of an ‘integral ecology’ (namely environmental, economic, social and cultural) aimed at the protection of the common good.Footnote 62

With regard to international institutions, it is important to mention the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy adopted by the International Labour Organisation,Footnote 63 the UN Global Compact that supports companies committed to sustainable and socially responsible business practices,Footnote 64 the UN 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs),Footnote 65 as well as the UN Addis Ababa Action Agenda of the Third International Conference on Financing for Development.Footnote 66

As far as the European Union is concerned, the call for sustainability has been supported by the Europe 2020 strategy for smart, sustainable and inclusive growth, on the basis of which Member States must develop their policies,and which has recently been reiterated in the context of the recovery plan following the SARS-CoV-2 pandemic, in particular in the Communication ‘Europe’s moment: repair and prepare for the next generation’ of May 2020.Footnote 67

The increasing desire for firm altruism also seems confirmed by several market studies.Footnote 68 In particular, people hold companies as accountable as governments for improving the quality of their lives,Footnote 69 and the improvement of society is considered the first goal that every company should pursue according to a study conducted among millennials from 18 different countries.Footnote 70

With regard to consumers, a growing number of them already align their purchases with their values and consider sustainability in their purchasing decisions.Footnote 71 Investors, too, are increasingly interested in financing socially conscious businesses, see e.g., the BlackRock statement of February 2019 on sustainability as the future of investing.Footnote 72 This has contributed to the growth of the socially responsible investing (SRI) movement,Footnote 73 the emergence of specific stock markets and indices (such as the Dow Jones Sustainability Indices and the Financial Times Stock Exchange 4Good), as well as the development of environmental, social and governance (ESG) criteria and sustainability assessment tools (such as the Global Impact Investing Rating System (GIIRS), the Global Reporting Initiative (GRI) Standards, the Sustainability Accounting Standards Board (SASB) standards, or the ‘B Corp’ certification issued by B Lab).

Even in the labour market, additional value is recognised by students and employees with regard to companies that can make a positive social and environmental impact.Footnote 74

Moreover, in the last years, the debate about corporate purpose and the ‘problem of shareholder primacy’ has intensified among legal academics and business school professors,Footnote 75 and the relevance of firm altruism has been recognised by the business community as well. In 2018, BlackRock CEO, Larry Fink, called for companies to, besides delivering financial performance, pursue a ‘social purpose’, make a positive contribution to society.Footnote 76 And in August 2019, nearly 200 CEOs representing the largest US companies that are members of the Business Roundtable released a ‘Statement on the Purpose of a Corporation’, which moves away from shareholder primacy and includes a fundamental commitment to all of a company’s stakeholders.Footnote 77 Moreover, the ‘Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution’, issued within the context of the World Economic Forum, affirmed that a company serves not only its shareholders, but all its stakeholders (employees, customers, suppliers, local communities, and society at large).Footnote 78

The answer of the law to this stronger demand for firm altruism coming from civil society has been the introduction of new hybrid organisational forms characterised by a governance structure suitable for incorporating within the decision-making process altruism as a good in and of itself, as a new corporate purpose equivalent and complementary to the profit-making purpose.

Among several hybrid entity models, the most comprehensive and globally recognised is the benefit corporation model born in the United States in 2010.

6 The Benefit Corporation

Benefit corporationsFootnote 79 are for-profit corporations whose purpose, in addition to generating profits, is to reduce negative externalities and produce a positive impact on the environment, society, the workers and the community in which they operate (the so-called ‘public benefit’).

The first benefit corporation statute was passed in Maryland in 2010. Today, 36 US states plus Washington DC and Puerto Rico have passed benefit corporation statutes, the majority of which are inspired by the Model Benefit Corporation Legislation (Model Act)Footnote 80 proposed by B Lab with the support of William H. Clark Jr. (Of Counsel at Drinker Biddle & Reath LLP) and the American Sustainable Business Council. The most important exception is Delaware, which in 2013 introduced its own statute, the Public Benefit Corporation Act.Footnote 81

Benefit corporations differ from traditional business corporations in entity purpose, directors’ accountability and transparency, but not in taxation because they are subject to the same income tax rules provided for business corporations.Footnote 82

The purpose of a benefit corporation is to create a ‘general public benefit’, which can be defined as a material positive impact on society and the environmentFootnote 83 assessed against a third-party standard. Moreover, a benefit corporation may, or must (depending on state law, such as Delaware), identify one or more ‘specific public benefits’ to pursue.Footnote 84

Directors of US benefit corporations, in discharging their duties, are required to consider (or balance in Delaware) the impact of their decisions on shareholders and all the other stakeholders of the company (such as employees, customers, the community), the environment, and the achievement of the public benefit purpose.Footnote 85

Transparency provisions require benefit corporations to publish an annual benefit report (every two years in Delaware) on their social and environmental impact using a comprehensive, credible, independent and transparent third-party standard (the third-party standard is not expressly required in Delaware).Footnote 86

In the US, there is no public control over benefit corporations’ reporting and activity. Should directors fail to pursue the public benefit purpose, the only available remedy is the benefit enforcement proceeding (or the ordinary shareholders derivative action in Delaware), the aim of which is not to recover monetary damages but to obtain an injunctive relief.Footnote 87

As for the circulation of the legal model, Italy was the first state to follow the US example, enacting in 2015 a legislation regulating benefit corporations, the so-called ‘società benefit’ (SB).Footnote 88 Later, between 2018 and 2020, benefit corporations were transplanted to several Latin AmericanFootnote 89 countries, such as Colombia,Footnote 90 EcuadorFootnote 91 and PeruFootnote 92 (the so-called ‘Sociedades de Beneficio e Interés Colectivo’—BIC), and to British Columbia in Canada (i.e., the ‘benefit company’).Footnote 93 Moreover, in Europe, France introduced, in 2019, a new similar legal status, that of the ‘entreprise à mission’, amending the Civil Code and the Commercial Code in order to allow a company to incorporate social and environmental objectives into the corporate object clause.Footnote 94

Considering the substance of the legal transplants, the Italian ‘for benefit’ model was the first benefit corporation model implemented by a civil law system. It is a mix between the Model Act and the Delaware law but is characterised by some typical features. In particular, the major innovations, compared to the US model, are the scope of the legislation and the control systems.

With regard to the first innovation, the società benefit status can be acquired by any existing for-profit and cooperative organisational form provided by the Civil Code. This approach has been followed by other civil law countries, such as Colombia, Ecuador, Peru and France, where the hybrid status (BIC or entreprise à mission) can be adopted by any existing for-profit organisational form (or cooperative company) provided by law.

As for the second innovation, the Italian system has provided for a public enforcement mechanism through the attribution of supervisory powers over the behaviour of società benefit to the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato). Again, the Italian approach has been followed by other civil law countries, such as Colombia,Footnote 95 Ecuador,Footnote 96 PeruFootnote 97 and FranceFootnote 98 that decided to set up different public enforcement systems.

Finally, it is worth mentioning that with regard to tax treatment, none of the countries that have so far regulated benefit corporations have introduced specific tax advantages associated with the use of ‘for-benefit’ models,Footnote 99 which are subject to the ordinary income tax rules provided for each organisational form. However, to facilitate the spread of the new models, some states have provided minor incentives,Footnote 100 or advantages granted at local level or in public procurement procedures.Footnote 101

From this brief analysis based on the legal systems that have so far regulated the benefit corporation model it is possible to identify a convergence between civil law countries and to affirm that they have embraced some characteristics of the Italian model.

7 The Benefit Corporation as the New Form of Firm Altruism

What characterises the ‘for benefit’ models is that they allow the introduction of the so-called ‘triple bottom line’ approach (of ‘people, planet and profit’) into the corporate purpose clause.Footnote 102

This means that, in order to have a positive impact on the environment and society and to create shared value, shareholders need to ‘sacrifice’ the ‘maximisation of shareholder value’ as the main purpose of the company, in particular in the short term.

Actually, conducting an economic activity in a sustainable way, on the one side, can generate profits attracting conscious consumers and increasing the company’s reputational capital, but, on the other hand, can be more expensive. For instance, the implementation of sustainable production strategies can be more expensive compared to the application of strategies focused only on cost reduction; sharing value with employees reduces the amount of profits distributed to shareholders; involving disadvantaged people as employees can be more expensive, especially at the beginning due to their training, etc.

Thus, from the EAL perspective it is possible to affirm that the creation of a benefit corporation (or other similar hybrid models) seems to be contrary to the homo economicus paradigm because it represents a deviation from the rational choice and maximisation of shareholder value paradigm.

Would it therefore be irrational for entrepreneurs or shareholders to choose to cut their own personal profit with a view to adding value to the community, creating benefits for the environment and civil society?

Thus, when investigating the benefit corporation phenomenon from the corporate law perspective, there are two questions that need to be answered:

  1. (i)

    Why should entrepreneurs or shareholders decide to relinquish part of their personal profit, reducing the profitability of the corporation in favour of production processes and entrepreneurial strategies oriented towards social and environmental sustainability? ‘If not for profit, for what?’Footnote 103 If not for profit (or rather, for the maximisation of personal profit), for what other reason should one invest in a for-profit corporation?

  2. (ii)

    How does the anthropological change of such entrepreneurs—who appear to be guided by a deeper ethos compared to the maximisation of profit in the short termFootnote 104 and are willing to integrate altruistic values in the business strategy and organisation—affect corporate law, and in particular the corporate governance debate?

7.1 If Not for Profit, for What?

To answer the first question, the starting point cannot but be, then, an analysis aiming at understanding the underlying reasons that push an entrepreneur to use an organisational form characterised by a blended purpose, i.e., a selfish one (personal profit) and an altruistic one (public benefit), given the lack of specific tax advantages and considering the additional obligations and cost to achieve the public benefit results and disclose them which are imposed on benefit corporations.Footnote 105

Using the arguments employed by Calabresi, the benefit corporation model, although apparently in contrast with the concept of ‘maximising individual’, is therefore made logical when considered as the product of a new way of interpreting economics, according to which the purposes—selfish (for profit-making) and altruistic (for the public benefit)—are both desired by the shareholders as goods in and of themselves. These purposes both enter into the company’s charter and by-laws, legitimising the pursuit of business strategies that can turn out to be less profitable in terms of immediate profit and maximisation of wealth for the shareholder,Footnote 106 but capable of generating wealth to be shared with the community and the environment.

The benefit corporation model must not be deemed irrational only because it does not respond to the McKean paradox and the pure market and command structures. In particular, with regard to market incentives, there is a lack of transactional gift, given the absence of tax benefits or any other kind of benefits for the new corporate model. While, considering the absence of any limits to remunerations, that is typical of not-for-profit organisations, there could be a chance for the rise of modified market incentives in the form of rewards to managers for results achieved in terms of profit and public benefit.Footnote 107

Moreover, the introduction of benefit corporations’ statutes represents a modified command structure stimulating firm altruism, in that it offers businesses the chance to freely opt for the legal model of the benefit corporation without imposing altruism from above through a rigid system of prescriptions, thereby destroying it; rather, it indirectly induces altruism, thus contributing to the creation of an entrepreneurial culture that is attentive to the protection of the environment as well as of civil societyFootnote 108.

Hence, if we look at the public benefit, as a good in and of itself, desired by shareholders, the benefit corporation model cannot be deemed irrational merely because it does not correspond to the behavioural model of the homo economicus.

7.2 The Benefit Corporation in the Corporate Governance Debate

Moving on to the second question, it is first of all necessary to stress that the benefit corporation represents a new governance model that exceeds philanthropy and corporate social responsibility. While corporate social responsibility, philanthropy, or the use of codes of ethics and self-regulation represent an obligation voluntarily undertaken by the company and therefore an external self-restraint limit as opposed to the dynamic of pure profit,Footnote 109 the adoption of the benefit corporation model imposes an internal limit on the for-profit aim, rephrasing in environmental and social terms the guiding principles of directors’ discretionary activity.

As regards corporate law, the introduction of benefit corporations allows, through a voluntary choice made by the founding shareholders or by the shareholders’ general meeting, the internalisation—which is legally binding on both the corporation and the directors—of the typical values of corporate social responsibility within the corporate purpose clause.Footnote 110

The formation of a corporation is the expression of the private autonomy of the shareholders (though within the limits of the mandatory rules prescribed by the law) who, opting for the new model characterised by a double purpose, decide to include in the articles of association the purpose of public benefit (general and/or specific, depending on the applicable state law). By so doing, the perimeter of the company’s purpose is widened to include both purposes desired by the shareholders—‘for profit’ and ‘for benefit’—imposing an internal limitFootnote 111 on the dynamic of maximisation of shareholders’ wealth and, consequently, on the directors’ management activity, which must be aimed at striking a balance between shareholders’ for-profit interest, the public benefit and the interests of a vast audience of stakeholders.

It is precisely the voluntary inclusion of the public benefit purpose in the corporate purpose clause that characterises benefit corporations, thus allowing to place them in the conceptual framework of contractarian theory and the shareholder primacy model.

Shareholders’ decision to pursue the public benefit purpose (general and/or special), which is desired as a good in and of itself, on an equal footing with profit, determines a different ‘characterisation of the interests sought by the very same shareholders’Footnote 112: shareholders do not pursue third-party interests (stakeholders’, community, or environment interests), rather it is their very interest as shareholders that is broadened to encompass both personal profit and the altruistic purpose of generating positive externalities or reducing negative ones deriving from the company’s activity.Footnote 113

Such expansion of the shareholders’ interest does not stem from mandatory rules or the acceptance of a revived concession theory or communitarian perspective compelling the pursuit of some form of public benefit, but rather from the unbound expression of shareholders’ autonomy. This implies the non-contradiction between the ‘for benefit’ model and the principles of liberal economy, since the internal limits to the shareholders’ interest derive from shareholders’ will, as opposed to being a restriction of their personal free will.Footnote 114

From the corporate governance debate perspective, the new corporate model with a blended purpose cannot be considered either as part of the stakeholder theoryFootnote 115 or as part of the director primacyFootnote 116 or the team production theory.Footnote 117

According to Bainbridge,

[a]ny model of corporate governance must answer two basic sets of questions: (1) Who decides? In other words, which corporate constituency possesses ultimate decisionmaking power? (2) When the ultimate decisionmaker, whoever it may be, is presented with a zero sum game in which it must prefer the interests of one corporate constituency over those of all others, whose interests prevail?Footnote 118

Following Bainbridge’s theoretical framework, the two basic questions to be answered for the analysis of the benefit corporation governance model are: (1) who has the ultimate control of the corporation? (the means question); and (2) to what ends must this control be exercised? (the ends question).

As for the stakeholder theory, stakeholders should have the ultimate control, and the primary goal of the corporation should be the balancing of the interests of all the constituencies impacted by the corporation’s activity. Benefit corporations cannot fall within the stakeholder theory in that:

  1. (i)

    stakeholders do not take part in the control of the corporation; in fact, stakeholders have no right in the management, nor are they entitled to take action in case of directors’ failure to pursue benefit purposes;

  2. (ii)

    the pursued interest is that of the shareholders (although widened to include the safeguard of different stakeholders’ interests and the achievement of the public benefit) and the directors bear fiduciary duties exclusively towards the shareholders.

As for the director primacy theory, the board of directors has the control, and the primary goal of the corporation is the shareholders’ wealth maximisation. The benefit corporation model cannot fall within the director primacy model since:

  1. (i)

    the control remains with the shareholders, who decide on the expansion of the corporate purpose (indicating its limits within the corporate purpose clause) and delegate to the directors the activity of balancing the pursued interests;

  2. (ii)

    the aim is not that of shareholders’ wealth maximisation, given that the shareholders’ economic interest is mitigated by the public benefit purpose.

As for the team production theory, the board of directors, intended as ‘mediating hierarchs’, has the ultimate control of the corporation and the director’s job is to balance team members’ competing interests. Benefit corporations cannot fall within the team production theory considering that:

  1. (i)

    the control still lies with the shareholders, since directors’ obligation to mediate among the different interests is not enshrined in their role, rather it is conferred on them by the shareholders, including the public benefit purposes in the company agreement;

  2. (ii)

    the aim pursued is not the abstract realisation (left to the directors’ pure discretion) of efficient forms of collaboration, rather it is the legal obligation to look after shareholders’ actual interest, as widened by the inclusion of the public benefit purposes in the company agreement.

Indeed, in benefit corporations corporate control lies with the shareholders (the ‘means question’) who then delegate it to the board of directors. The directors, as agents of the shareholders, must pursue their interests as established and widened in the company agreement (the ‘ends question’).

Compared to the shareholder primacy model, then, what is not accepted here is exclusively the primary purpose of maximisation of shareholder wealth, in that the shareholders themselves, within the range of their private ordering, have decided to impose a restriction thereon by also accepting purposes of public benefit.

The above interpretation becomes evident from the shareholder-centric configuration of the benefit corporations lawFootnote 119 in the US and other legal systems such as Italy.

To stakeholders other than the shareholders or, more generally, to the beneficiaries of the public benefit, neither the Italian nor the US legislation attributes any right to participate in the management of the corporation: there is no provision establishing a special assembly for them; they have no rights to vote in the general assembly, still wholly reserved to the shareholders; there is no provision on some kind of representation in the managing or control bodies, still exclusively appointed by the shareholders.

Furthermore, in both systems, the inclusion of public benefit purposes (general and specific) in the corporate purpose clause does not imply the creation of personal rights for third parties benefiting therefrom, nor does it imply the existence of any enforceable duty of directors to a person that is a beneficiary of the public benefit purpose or to other non-shareholder constituents. Indeed, the only fiduciary duties directors have are those owed to the corporation and its shareholders.Footnote 120 Consequently, the only ones who are entitled to act in cases of breach in the implementation of public benefit purposes are the corporation and its shareholders.Footnote 121 No action is expressly prescribed in favour of stakeholders.Footnote 122

Even the procedures that are provided for an existing corporation to acquire the legal status of benefit corporation or to terminate its status as such emphasise the fundamental role of shareholders in that they prescribe the existence of a supermajority (so-called ‘minimum status vote’ in the US Model Act) in order to amend the articles of incorporation or approve a fundamental transaction such as a merger, consolidation or conversion.Footnote 123

Lastly, the lack of governmental powers of control over the activity performed by benefit corporations should be stressed. In the US, the only form of control is through private enforcement tools such as the benefit enforcement proceeding or shareholders derivative actions for breach of fiduciary duties and disclosure mechanisms (annual report and free employment of the third-party standard). This private enforcement regime has been established in favour of shareholders and third parties (customers and investors who have access to information) and not with a view to allowing any form of public control.Footnote 124 In Italy, the supervisory role attributed to the Public Competition Authority does not impact on the above analysis, in that the Authority operates on a level other than corporate law, considering the violation of external limits imposed on corporations by the regulation aimed at safeguarding competition and consumers.Footnote 125

Taking into account the graphic representation proposed by Bainbridge,Footnote 126 it is possible to summarise what has been described to this point by placing the ‘for benefit’ corporation in Fig. 1.

Fig. 1
figure 1

The ‘for benefit’ model within the corporate governance debate

On the Means Axis (who has the ultimate control of the corporation) are the theories that emphasise, on the one hand, the role of the board of directors and, on the other, the role of the shareholders. On the Ends Axis (to what ends must this control be exercised) are, instead, theories that emphasise, on the one hand, shareholder wealth maximisation, meant as an exclusively economic value represented by the maximisation of the shares’ market value, and, on the other, the stakeholder model, according to which the management aims at equally safeguarding the various interests carried by all the existing corporate constituencies.

Benefit corporations are to be placed, with regard to the control in the area of shareholder primacy, considering the shareholder-centric regulation and regarding the interests pursued, in an intermediate area that can be defined as ‘shareholder welfare maximisation’ (wealth + altruism), which suggests that the pursuit of the shareholders’ interests includes: on the one hand, the shareholders’ economic interest (i.e., wealth, but without the aim of its maximisation in monetary terms), and, on the other hand, other ‘altruistic’ values, such as the purpose of public benefit, both general and special (i.e., altruism).Footnote 127

8 Conclusions

Using the categories employed by Calabresi, it can be affirmed that benefit corporations constitute a further manifestation of firm altruism, more efficient (from a law perspective) than not-for-profit organisations, in that it is devoid of the limits of the non-distribution constraint—which prohibits the distribution of residual earnings to individuals who exercise control over the firm—and is characterised, compared to philanthropy, by a deeper and lasting impact on the environment and civil society, given the integration of altruistic values within the framework of the business purpose clause contained in the articles and memorandum of association.

Moreover, the use of the benefit corporation model as a vehicle for firm altruism falls outside the debate over the relationship between philanthropic activity and shareholder wealth, or the larger debate over the link between corporate social responsibility and corporate financial performanceFootnote 128 given that the shareholder wealth maximisation paradigm is attenuated in favour of the shareholder welfare maximisation paradigm.

If we look at the law as a tool capable of shaping social awareness and at the same time as an expression of the internal dynamics of civil society, of its social and economic values,Footnote 129 it is possible to assess, on the one hand, how the introduction of benefit corporations’ statutes contributes to creating a new culture of altruism, educating entrepreneurs, consumers and investors in a new form of capitalism (stakeholder capitalism), and, on the other hand, how it corresponds to the cultural transformation currently happening in civil society and supports the growing collective desire for firm altruism.

Finally, from the European perspective, the legal transplant of the US benefit corporation hybrid model would be consistent with the recent European Union initiatives—such as the proposal for a directive on directors’ duties and sustainable corporate governance—recognising the growing importance of sustainability in the business sector and aimed at a more comprehensive protection of stakeholders’ interests in for-profit entities.