Necessity is the Mother of Invention A Renewed Call to Engage the SEC on Social Disclosure

Abstract

Corporate law in the United States is undergoing a significant but understated revolution.  Delaware is one of nineteen states to adopt the benefit corporation, a corporate form that legally facilitates the pursuit of both financial and social ends.  While the existing state statutes incorporate mandatory disclosure regimes, they lack the enforcement mechanisms necessary to guarantee the accuracy of benefit reports and are not sufficiently uniform to allow investors to make informed decisions.  As such, this Note argues that the Securities and Exchange Commission (“SEC” or “Commission”) ought to amend its proxy disclosure and periodic reporting rules to ensure that registrants incorporated under benefit statutes provide substantial information about their social impact.

Mandatory social disclosure has been rejected in the past—the condition of “materiality” has long governed corporate disclosure.  The recent enactment of the Delaware benefit corporation suggests that some benefit corporations will become public companies. Thus, for the first time, social impact has become a legal obligation of corporate status, effectively expanding the scope of what is “material” to investors.  The SEC’s broad investor protection mandate and its history of regulating financial disclosure put the Commission in the best position to introduce a social impact disclosure regime for publicly traded benefit corporations.  Such a regime has the ability to preserve the benefit corporation as a legitimate corporate form and, importantly, legitimize its dual mission of purpose and profits.

The author would like to thank Professor Harvey J. Goldschmid for his unwavering support and guidance throughout the writing process. She would also like to thank Professor Robert J. Jackson, Jr. for much-needed inspiration and the entire Columbia Business Law Review staff for their assistance in preparing this Note for publication. Finally, she would like to thank her parents for their unconditional support throughout law school and all of her other pursuits.