The Firm and Common Pool Resource Theory: Understanding the Rise of Benefit Corporations

Abstract

In September 2015 the crowd-funding site Kickstarter announced that it would adopt a new corporate form, that of a benefit corporation. Kickstarter is far from alone in this decision; in fact, it joined a growing list of tech firms that are moving towards adopting a benefit corporation designation. The result of the legal movement is that corporate governance across the nation is changing, impacting everything from business ethics training to Board decision making, with wide-ranging implications for the economy, environment, and civil society. Despite its growing popularity, though, the rationale behind the emergence of benefit corporations is an understudied question. In this article, we argue that benefit incorporation affects the very nature of the corporation by creating corporate common pool resources, and that the common pool resource theory provides a way to understand the puzzle and future of the movement. This approach is important because it re-situates the conversation, from a narrow view of the effect of the legislation on traditional corporate concepts to a broader view of the impact of the legislation. Furthermore, we consider the benefit corporation through the lens of Professor Elinor Ostrom’s Design Principles, offering a unique perspective through which to analyze if the design of state statutes and implementation by business entities meet criteria that would predict successful governance of the benefit corporation Common Pool Resources.