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Is law normalizing Hybrid Organizations? Putting profit-with-purpose corporations into historical perspective

  • Levillain, Kevin
  • Segrestin, Blanche
  • Hatchuel, Armand
Publication Date
Jun 01, 2017
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Among other challenges, hybrid organizations face a legal one as the law divides organizations into nonprofit and for-profit structures. For a few years however, new legal forms of corporations have emerged, whose claim is to overcome this challenge: profit-with-purpose corporations (PPCs), such as the Benefit Corporation. In this paper, we investigate how these innovative legal provisions have been designed to help solving this legal challenge, in a two-step process. First, we reexamine the origins of the legal divide through an historical analysis of the separation of UK and US corporations into two legal categories. We show that although early corporations were, in essence, profit-with-purpose organizations, business corporations have difficulties today to defend a public interest orientation because of a major shift in corporate governance that occurred in the 19 th century: the disappearance of corporate charters demanding public interest purposes, which led to hand the control of corporations over to shareholders through the generalization of fiduciary duties imported from unincorporated businesses' governance. Second, we exhibit the design process of PPCs to help solving this divide. We show that PPCs propose a way to " shift back ", yet not by restoring control by the State, but by reintroducing the corporate purpose into legal documents, and designing accountability mechanisms to control multiple purposes. We argue that studying the emergence of legal structures for profit-with-purpose organizations may open new avenues for research on hybrid organizations.

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