Experts Promote Benefits of For-profit, Non-profit Hybrids
February 20, 2010
The world's financial system doesn't have enough money to fill the growing global need for philanthropic services, a problem that can be tackled through stronger collaboration between governments, corporations and non-profit groups.
That was the word from a number of panelists and audience members at the Vermont Law Review's 10th Annual Symposium, "Corporate Creativity: The Vermont L3C and Other Developments in Social Entrepreneurship" on Feb. 18 and 19.
The event explored hybrid organizations that use for-profit business practices to achieve non-profit goals. Panelists and audience members discussed the legal structures and methods for achieving non-profit goals with for-profit mechanisms, both domestically and abroad. The event also examined low-profit limited liability companies (L3Cs), an organizational form that Vermont was the first in the nation to adopt.
Focusing on both theory and practice, the symposium furthered legal scholarship in the field of social enterprise, while equipping legal, business and non-profit professionals with the tools needed to accomplish their social ventures.
In 2008, Vermont became the first state in the country to enact low-profit limited liability companies, a cross between a non-profit organization and a for-profit corporation. L3Cs are designated by the Vermont Secretary of State as low-profit with charitable or education goals. Five states now recognize L3Cs.
Dean Jeff Shields opened the symposium by encouraging VLS students to explore "this middle ground between traditional for-profit business ventures and mission-driven non-profit efforts."
The first panelist was Arthur Wood, the former vice president of social financial services at Ashoka, the nonprofit organization that pioneered social entrepreneurship. He said the world's social services network has been hard hit by the recession and that the current system for funding philanthropic efforts is unsustainable.
Wood said the world lacks structures for long-term financing and collaboration among governments, corporations and non-profit groups, which traditionally operate "in silos rather than working together."
He called for an overhaul of legal and financial regulations, the leveraging of private capital and the creation of financial incentives geared toward promoting collaboration between the public and private sectors.
"We need to change the whole paradigm to have a social and economic impact," he said. "It's not a question of when we should - we have to do it. Do we stay with the status quo or create a structure to empower ordinary Americans to become social entrepreneurs?"
The symposium brought together some of the top names in the field of social entrepreneurship. In addition to Wood, panelists included Robert Lang, originator of the L3C who discussed its history and application; Dana Brakman Reiser, a Brooklyn Law School professor who discussed legal issues arising from the creation and operation of hybrid organizations; and Stephen Lloyd, an attorney in the United Kingdom who created the Community Interest Company, which also bridges the nonprofit and forprofit worlds and is used by social purpose organizations using business models to fund their activities.
VLS Professor Betsy Schmidt said the panelists and audience members benefited from the vibrant discussion about the business forms that can be used to help solve society's problems.
"We recognized that the current binary system, which categorizes every enterprise as either for-profit or non-profit, can restrict our abilities to bring the sectors together to solve problems," she said. "Several new business forms have emerged in the United States, the United Kingdom and Europe. They include the L3C and the B corporation in the United States, as well as the community interest company (CIC) in the United Kingdom."
Panelists discussed the strengths and weaknesses of each of these business forms and examined the abilities of traditional for-profit and non-profit business forms to further social goals.
"The consensus was that no one business form works for every situation, and that many of these newer business forms will change over time to meet some of the concerns expressed by those at the conference and elsewhere," Schmidt said.
Professor Linda Smiddy said the conference addressed new organizational forms that facilitate cooperation among the non-profit, governmental and for-profit sectors for the purpose of solving society's problems.
"One theme was to explore ways to stimulate such cooperation and to explore the issues raised by the creation of new organizational forms from the perspective of different professions: law, business, nonprofit, tax, economics, accountancy and others," Smiddy said.
More information is available at: http://lawreview.vermontlaw.edu/symposia/symposia.htm
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