Will Public Benefit Companies Commit Securities Fraud? Toward a More Comprehensive Understanding of the Benefit Corporation: Essays 54 Southwestern Law Review 2025

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54 Sw. L. Rev. 128 (2025)
Will Public Benefit Companies Commit Securities Fraud?

handle is hein.journals/swulr54 and id is 136 raw text is:

WILL PUBLIC BENEFIT COMPANIES
COMMIT SECURITIES FRAUD?

James J. Park*

I. INTRODUCTION
At least since the Business Roundtable's 2019 statement on the purpose
of a corporation,' there has been substantial interest in shifting businesses
away from shareholder wealth maximization. Such change might happen not
only through reform of the governance of existing corporate giants but
through the entrepreneurial ventures that may eventually become public
companies. If a commitment to social responsibility is part of the culture of
a new firm from the start, that commitment may develop deep roots that
shape decision-making as the firm becomes successful and grows.
There has been a longstanding debate about whether the corporate form
permits managers to pursue ends broader than shareholder wealth
maximization. The law places barriers in front of corporate managers when
they seek to benefit society rather than focus mainly on increasing the value
of the corporation's equity.2 Many states have thus created the option for
entrepreneurs to form a different kind of entity, a Public Benefit Corporation
(PBC), governed by law explicitly permitting managers of a business to also
pursue social ends.
Michael Dorff has written an important book that both critically
examines the potential of PBCs and provides guidance to the next generation
of entrepreneurs as to how they can achieve social good through their work.3
His book thoroughly and critically examines the state law governing PBCs
while making a compelling case that rational entrepreneurs should take into
account stakeholder interests in building their businesses.

* PROFESSOR OF LAW, UCLA SCHOOL OF LAW. Thank you to Patrick Reiser for excellent research
assistance.
1. Statement on the Purpose of a Corporation, BUS. ROUNDTABLE, https://opportunity.
businessroundtable.org/ourcommitment/ (last visited Jan. 9, 2025).
2. See STEPHEN M. BAINBRIDGE, THE PROFIT MOTIVE: DEFENDING SHAREHOLDER VALUE
MAXIMIZATION 64 (2023).
3. See MICHAEL B. DORFF, BECOMING A PUBLIC BENEFIT CORPORATION: EXPRESS YOUR
VALUES, ENERGIZE STAKEHOLDERS, MAKE TIE WORLD A BETTER PLACE 5-6 (2024).

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