Delaware’s Public Benefit Corporations: Comparative Analysis and Fiduciary Duties

The Delaware Court of Chancery asserted in eBay Domestic Holdings v. Newmark that all activities of a for-profit Delaware corporation must seek to maximize the economic value for its stockholders. While the requirement to maximize stockholder value bolsters investors’ confidence in Delaware corporations, it also limits the abilities of corporations to pursue activities that are conducted for a public benefit. The continued expansion of socially-responsible investing demonstrates that investors are willing to balance maximized stockholder value with corporate environmental stewardship, improved labor conditions, and the pursuit of myriad causes. Delaware recently became the nineteenth state to enact legislation authorizing the creation of public benefit corporations. A public benefit corporation (PBC) is a for-profit corporation with a tri-partite interest-balancing scheme that allows the corporation to pursue activities for public benefit in addition to its profit-maximizing goals. PBC status increases investment by strengthening investors’ confidence through transparency and regulation, as well as by allowing the incorporation of organizations that were previously prohibited from pursuing public-benefit activities as a for-profit corporation. Though Delaware joins such corporate strongholds as New York, Pennsylvania, and California in codifying PBCs, the implementation in Delaware is transformational. The enactment of PBCs, their success, and the eventual development of decisional PBC law in Delaware, the incorporation capital of the world, will chart the path for public benefit corporations nationally. Part II of this note explains public benefit corporations, their purpose and objectives, and their impact. Part III examines the implementation of PBCs in Delaware, and in particular, how Delaware’s PBC fiduciary-duty provisions differ from those in the model act and in other states. Since PBCs in Delaware are still in their infancy and decisional law is still undeveloped, Part IV explores how the fiduciary-duty provisions are likely to be interpreted in light of existing Delaware corporate law and other relevant authorities.