Tracking Changes in Social Enterprise Law

social-enterprise-law-tracker-01-largeThere’s more than one way to run a mission-driven business. Benefit corporations are allowed in 30 states and the District of Columbia. Two of those states (Maryland and Oregon) also allow benefit limited liability corporations (BLLCs). Social purpose corporations (SPCs) are legal in four states; low-profit limited liability companies (L3Cs) are legal in eight. More forms are in use outside the United States. And we’re not even talking about Certified B Corps.

Sorting this out is the mission of Social Enterprise Law Tracker, a new project from two members of New York University’s Law and Social Enterprise Fellowship program.   “People are approaching the task of running social enterprises in different ways. Several different forms are available in the US, and other countries have even more,” says Rob Esposito, an attorney at Drinker Biddle Reath who launched the site with Shawn Pelsinger in May 2015.

It’s like IPhone vs. Android, VHS vs. Betamax, or alternating vs. direct current.   Social enterprise laws are new. Vermont passed the first L3C law in 2008, and Maryland was the first to allow benefit corporations in 2010. Whenever a big idea emerges, it’s common for several variations on the theme to compete before the market chooses a standard format. Until that happens, there’s a lot of confusion.

The site features an ingenious interactive map (above) that shows how states have passed, considered, failed, and repealed social enterprise laws each year from 2009 to 2016. It has separate maps for benefit corporations, L3Cs, SPCs, and BLLCs, and each map connects to spreadsheets containing detailed information and links for each law. The site also includes links to resources in the field, and it’s free.

Benefit corporations are the most common legal form for social enterprise, but the debate is far from over. The states of Washington and Texas allow SPCs but do not allow benefit corporations. Georgia and Ohio allow neither, but their lawmakers are considering both. Wisconsin’s legislature is currently considering a L3C law. But North Carolina has repealed their L3C law, and this legislation has failed in 18 other states.

L3Cs are faltering because tax laws are unclear, says Esposito. They are for-profit corporations, but they can also accept grants from private foundations in order to advance their social missions. The grants are given under an Internal Revenue Service category called a Program Related Investment (PRI). But the IRS has not published enough detail about which kinds of giving qualify as PRIs, making it difficult and risky for foundations to give in this way. Senator Cory Gardner (R-CO) has introduced a law defining PRIs (S. 2313), but so far it has not passed. In the meantime, says Esposito, “benefit corporations are sort of like Facebook, and L3Cs are like Myspace.”

The next step for the site is mapping social enterprise law in other parts of the world. “By doing the US, we’ve finished about half the work,” says Pelsinger. “But there is a tremendous amount of activity in Europe.” You can see hints of what’s going on in Greece, France, the UK, Spain, and other countries at the site of The European Social Enterprise Law Association (ESELA), which was founded by the European Commission three years ago. But SocEntLawTracker.org is easy to understand, and the ESELA site is not.

Esposito and Pelsinger have built and maintained the site with support from NYU’s Law School, using their own network of contacts to keep up with what’s going on in social enterprise law. They are eager to expand the network by accumulating tips and leads from interested visitors—so check it out.

Living Wage Movement Is Now Amazingly Normal

Image 2_Colin with FinalistsJM Family President & CEO Colin Brown (l) with finalists in the company’s first ever Pinewood Derby Car Championship, benefiting United Way.

The living wage movement went mainstream in 2015. Just ask the Floridian Of The Year.

Last year started with Wal-Mart, responding to nationwide protests, announcing that it was immediately raising its minimum wage to $9 an hour, with $10 planned for February 2016. Big deal, said the movement’s activists. They had already shifted their focus to local and state governments. They demanded that the minimum wage be raised to a “living wage” of $15 an hour—with a union.

As the year wore on, the Fight for $15 movement took off faster than even its organizers had hoped. By the end of the year, activists were busy in 270 cities. All three Democratic presidential candidates voiced their support. Fourteen city, county, and state governments approved $15 minimum wage laws, with notable victories in New York, Massachusetts, New York City, Los Angeles, Pittsburgh, Chicago, San Francisco, Rochester, Buffalo, Seattle, Milwaukee, and Santa Fe, according to a tally kept by the National Employment Law Project (NEPL).

While $15 makes an easy-to-understand political goal, the actual wage needed to lead a dignified life depends on where you live and who lives with you. FIguring all that out is the goal of the Living Wage Calculator, which is maintained by Amy K. Glasmeier at the Massachusetts Institute of Technology. Glasmeier’s team scored a big victory in late 2014, when IKEA announced it would use the MIT site to gradually adjust its starting wages up to a living wage, with an initial hike to $12 an hour. A year later, IKEA reported that the decision had been good for the company, and expanded it to include operations in the United Kingdom.

But the movement’s biggest win might have come in December, when the mainstream business magazine Florida Trend named its “Floridian of the Year.” Colin Brown, CEO of JM Family Enterprises, got the honor for quietly implementing a $16 hourly minimum wage for his company’s 4,100 employees.

The amazing thing was how normal it all seemed. Brown, a 66-year-old lawyer educated at a military academy and Duke University, runs a franchised Toyota distributorship in southeast Florida. He is on the board of directors for his local United Way, a business roundtable, and a statewide good government association. He loves the Pinewood Derby.

Brown is about as mainstream as it gets. But he “has a very definite moral compass,” says a colleague in the Florida Trend article. “He’s going to decide what’s right, not what makes the most money.”

The Fight for $15 has 16 more legislative or ballot proposals pending in another 15 jurisdictions this year, according to the NEPL. And with friends like Colin Brown, the sky’s the limit.

The URL Of Every Corporation In The World? This Site’s On It

Chris_Taggart,_co-founder_&_CEO_of_Open_Corporates,_speaking_at_Open_Up!_(8182368387)Chris Taggart, co-founder and CEO of OpenCorporates.com

Benefit corporations are like the goody-two-shoes in a school where everyone else misbehaves. While they voluntarily disclose all kinds of information about their operations, other corporations hide as much as they can.

The worst corporate offenders enable cross-border money laundering and tax evasion. But many legitimate privately owned businesses would also prefer not to publish information they are required to submit to governments about their owners or their finances. And since business owners have a lot of political influence, it’s often hard to get to those public records. But one plucky little website has taken on the task.

Open Corporates was created by two open-data activists in the United Kingdom and funded by several foundations, including the World Bank Institute. The site’s goals are huge and simple: to get the URL of every company in the world, and to import and match government data relating to those specific companies. The site delivers that information in an easy-to-search format, and it also ranks countries and states according to how much information they publish.

Open Corporates is a project of Chris Taggart and Rob McKinnon, entrepreneurs and open-data activists, and their company, Chrinon Ltd. “Few parts of the corporate world are limited to a single country,” they write, “so the world needs a way of bringing the information together in a single place that’s accessible to anyone, not just those who subscribe to proprietary datasets.” The entire database is available for download to anyone who asks in a variety of open formats, and is shared through the Open Database License.

In mid-January 2016, the site had information on 85 million companies in 105 jurisdictions, and they were working with the open data community to add more each week. The database maintained by Dun and Bradstreet contains over 240 million company records from 200 countries, but it’s available only to subscribers and it isn’t cheap.

A dozen countries score 10 on the 100-point Open Company Data Index, including world-famous offshore tax havens like Bermuda, Barbados, and Jersey. Denmark and the United Kingdom are the highest scorers (both at 90); corporations registered in those countries must publish the names of directors and financial statements in free, searchable databases. The United States scores just 30 out of 100, which puts it in the same league as Albania and Myanmar.

It is true that most US corporations that sell stock are required to submit lots of information to the Securities and Exchange Commission (SEC), and those documents are searchable on the SEC’s EDGAR database. Yet fewer than 1 percent of American companies are traded on the major exchanges. There are also about 28 million privately owned firms in the US, according to Sageworks, which analyzes aggregate information collected from accountants and banks.

All corporations in the US have to register with a state government. The registrations usually name the corporation’s owner or agent, and most of them offer other kinds of information. But Open Corporates lists only two American states (Alaska and Arizona) that publish the names of shareholders of private companies online. Only four (Alaska, Florida, Vermont, and Wyoming) publish the names of directors, and no state publishes financial reports.

B Corps are required to pass rigorous, voluntary audits to certify that their social and environmental practices meet high standards, and to make those audits available to the public. There are more than 1,400 of them in 42 countries, which means we have just 240 million more to go. Open Corporates has started the job.