Dana Brakman Reiser

Charity Law’s Essentials

The boundary between charity and business has become a moving target. Social enterprises, philanthropy divisions of for-profit companies (most notably at Google), and legislation creating hybrid nonprofit/for-profit forms all use business models and practices to mold and pursue charitable objectives. This article asserts that charity law must be streamlined in order to respond to these and other dramatic charitable innovations. My new vision of charity law centers around two essential requirements. First, charity law must continue to demand that charities maintain an other-regarding orientation, pursuing benefits for someone other than their own leaders and managers. Second, existing charity law must be revised and supplemented to mandate that charities utilize group governance. Additionally, this dual focus should be intensified by removing the limits on commercial and political activity that currently clutter charity law. These reforms will enhance charity law’s ability to regulate traditional charities. Moreover, focusing charity law on its essentials will reveal the tools necessary to respond to the exciting developments blurring the boundary between charity and business.

Regulating Social Enterprise

The challenge for regulators considering how to approach social enterprises lies in their dual purposes of pursuing profit for owners and good for society. This challenge exists on multiple levels. Conceptually, it is unclear how much involvement by public regulators will be needed to monitor market entities with investors, employees and customers. Like in the purely for-profit sector, perhaps regulators are better limited to engaging in consumer protection, anti-discrimination, and garden variety anti-fraud activities. Yet, social enterprises dedicate some of their energies and resources to pursuing benefits for society. Attorneys general charged with protecting charitable assets and enforcing the accountability charity fiduciaries rightly see social enterprises as potentially within their mandates and possess relevant expertise. Practically, though, how can a regulator (or any enforcement mechanism) police the operations of an enterprise committed to two goals that will often conflict? Where social enterprise enthusiasts see the value in blending mission, architects of a regulatory framework see a muddle. Furthermore, AGs are already overtaxed and would need an infusion of resources to pursue social enterprises in addition to their very full regulatory plates. This Article identifies the interests and the challenges of the states and their regulators considering their role in the burgeoning social enterprise sector.