Many corporations seek to persuade their investors, customers, and employees that they care not only about profits but also about corporate constituencies such as workers, communities, and the environment.

So-called public benefit corporations (“PBCs”) are at the forefront of this movement. A PBC’s charter must name a specific public benefit, such as protecting the environment or reducing poverty. Moreover, when making business decisions, a PBC’s directors must balance the goal of maximizing shareholder wealth with the specified public benefit and the interests of those affected by the PBC’s operations. In other words, the law explicitly dispenses with the principle of shareholder primacy and instead binds the PBC’s directors to a more complex set of goals.

At least in theory, therefore, public benefit corporations have a clear legal commitment to non-shareholder constituencies. In contrast, regular business corporations may publicly declare that they are interested in protecting other stakeholders, but there is no requirement or guarantee that they will live up to their promises. PBCs, on the other hand, are legally bound to pursue the public benefits specified in their charters. This legal obligation, so the narrative goes, allows PBCs to send a credible signal to investors, customers, and employees that they are genuinely committed to their stated public benefit.

In practice, however, the statutory defaults governing PBCs have significant limitations that undermine their commitment value (cf., e.g., Jill E. Fisch & Steven Davidoff Solomon, The Value of a Public Benefit Corporation, in Research Handbook on Corporate Purpose and Personhood 68 (Elizabeth Pollman & Robert B. Thompson eds., 2021)). The law of Delaware, where all publicly traded PBCs are currently incorporated, illustrates this point. Under Delaware law, a PBC can revert to being a regular business corporation through a simple charter amendment. And, even without such an amendment, PBCs may de facto abandon their social goals due to investor pressure.

Delaware law allows PBCs to use charter provisions that help overcome these limitations. But do PBCs make use of this opportunity? I explore this question in my paper Publicly Traded Public Benefit Corporations: An Empirical Investigation, forthcoming in the Stanford Journal of Law, Business and Finance.

The paper uses a novel hand-collected and hand-coded dataset of more than 300 corporate charters. The dataset includes all non-SPAC public benefits corporations that were publicly traded on or before December 31, 2023—nineteen in total. Each corporation is matched with twenty regular business corporations to obtain a control group. The matching process identifies business corporations that are incorporated in the same state as the PBCs (Delaware), have been publicly traded for the same number of years, and are similar in size.

The picture that emerges from this dataset is complex and shows substantial heterogeneity across different PBCs. Whereas some PBC charters contain multiple provisions reinforcing the company’s commitment to social or environmental causes, others forgo such provisions entirely, and most fall between these two extremes.

For example, two types of charter provisions that can help to strengthen a PBC’s commitment to its stated public benefit are supermajority requirements for amending the PBC’s charter and dual-class shares. Supermajority requirements for corporate charter amendments can be used to make it more difficult for a PBC to revert to a regular business corporation or to change the specified public benefit. However, of the nineteen PBC charters in the dataset, only four include a provision requiring a supermajority for amendments that would end the corporation’s PBC status or modify its stated public benefit. This omission is even more glaring because thirteen of the remaining fifteen PBC charters contain supermajority requirements protecting other parts of the charter.

Dual-class shares can help to protect the PBC’s public commitment by protecting the founders’ control and, by extension, their idiosyncratic vision for the corporation (cf. Zohar Goshen & Assaf Hamdani, Corporate Control and Idiosyncratic Vision, 125 Yale L.J. 560, 566 (2016)). Of the nineteen PBCs in the dataset, nine, or almost half, use dual-class shares. Moreover, comparing the PBCs with their matched regular business corporations, PBCs make more frequent use of dual-class shares than regular corporations, though that finding fails to satisfy the conventional 5% threshold of statistical significance.

Accordingly, the paper shows that supermajority requirements covering the corporation’s PBC status and dual-class shares are only found in a minority of PBC charters. However, more than half of the PBC charters in the dataset included at least one of these two mechanisms, and a few PBC charters even include both.

The paper also examines the use of numerous other types of charter provisions, ranging from staggered board provisions to liability waivers. However, most of these provisions appear to play no role in strengthening PBCs’ commitment to their stated public benefits, and PBCs use the relevant provisions at roughly the same rate as regular business corporations.

Aside from examining a large set of different charter provisions, the paper also covers potential signaling mechanisms outside the charter. These include the composition of corporate boards, ESG scores, and certification by B Lab, a nonprofit organization. On various demographic dimensions, such as the age of board members, PBC boards are not statistically significant from regular business corporation boards. Similarly, the paper finds that the ESG scores of PBCs do not differ, in a statistically significant way, from those of regular business corporations. However, it is remarkable that sixteen of the nineteen PBCs in the dataset obtained B Lab certification for themselves or their subsidiaries.

The paper also explores the role of lawyers in the design of PBC charters. Using hand-collected data on the law firms and individual attorneys involved in the going-public transactions of PBCs, the paper shows that most law firms and attorneys were involved in only one such transaction. Moreover, the paper demonstrates that a higher level of experience on the part of law firms correlates with a higher level of legal commitment to the stated public benefit.

The paper’s findings have important legal policy implications. Numerous scholars have proposed reforms to tighten the statutory restrictions on publicly traded PBCs. However, such calls are premature. Publicly traded public benefit corporations are a recent phenomenon, and the heterogeneity in charter design offers a valuable opportunity to observe the effectiveness of different commitment mechanisms over time before taking action. Moreover, the positive correlation between lawyers’ experience and the level of legal commitment suggests that PBCs may move towards a greater level of legal commitment even without regulatory intervention. For the time being, therefore, regulators would be wise to exercise restraint.