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Mapping the Fourth Sector


Bill Densmore's running notes on "Mapping the Fourth Sector" summit at George Washington University on Thurs., Jan. 15, 2015. These notes are raw, in real time and subject to correction. This page will be updated as fixes and details are added and to format better.

KEYNOTE SPEAKER: Congressman John K. Delaney, D-Maryland

Introduced as the only former CEO of a publicly traded company now serving in the US House


Places that do well are those that have great relationships among private and public and philanthropy sectors. How do we coordinate all these great resources, talent and capital.

What's concerning: There are a lot of needs, a lot of people are struggling and dealing with the macro changes that are coming in the world. Global interconnection is changing the world's economy. It's been a blessing for some people. It's been really challenging for other people. Needs really great.

Delaney has a bipartisan infrastructure bill in the Congress -- 40 Dems and 40 GOP on it. Deals with problems of international tax systems. "A lot of people have been watching how much money is accumulating overseas," he says his bill woudl repatriate that witih tax law changes but require the money be used for infrastructure improvements.

Trying to bring together the best ideas of progressive and conservative moments rather "than some mushy compromise."

Need to get private market innovation into the public sector.

POLICY PANEL: Is arena federal or state?

  • Moderator: Russell Soullivan, former staff direcdtor Senate Finance Committee

STATE: Richard Geisenberger, chief deputy secretary of state, state of Delaware.

Speaking for himself.

He talks about B-corp legislation.

This is a movement of entreneurs and investors. Our role is to provide enabling statutes. they wanted it to work in the public-traded large corporate environment and how it would work with Delaware case law and fiduciary law.

B-Lab people came to Wilmington to talk with legislature and brought some investors with them. "What the investors told us was they wanted the ability enforce their rights and make sure the mangaers pursued that benefit that the corporation delcares as the benefit."

That was a turning point, lawmakers realized they were being asked to enable the desires of investors to control the corporation. There are now over 1,000 corporations that have registered in 26 states and DC as B-corps or social benefits of one osrt of another. It crosses all ideologies.

"I have no state that every state in the country will have this sort of statute by the end of this decade ... I think you will definitely see this in every US state."

There are a lot of variations in the statues, here were key Delaware issue:

  • Is the corp pursuing a general public benefit or is it required to pursue specific benefits. There are lots of general public benefits -- environmental, social, employees, local communities. How do you weigh different benefits. Delaware said the articles should declare a very specific public benefit. The state has come up iwht a generic public benefit.

There are 29 public benefit corps in Delaware and 23 have adopted the general public benefit in theyr bylaw: The coproration shall have a specific public benefit to advance the environment by a measurble standard kind of way.

Dalware ways a benefit corporation must meet three-point balancing test:

  1. Pecuinary interest of stockholders
  2. Intersts of those materially affected by the corporations conduct, and
  3. Specific public benefit identified in the bylaws (example above)

Why that construct: Lots of states have laws that say you MAY consider those things. Delaware law says you HAVE to consider these things, and balance the three.

Who polices it? What are reporting requirements? Flexible?

Delaware adopted flexiblity. Requires periodic statements to stockholders. It doesn't say who the assessor should be. Is it publicly available or a third-party assessment.

Left it to investors to enforce the requirements; not Delaware or third parties to enforce. Sharehodlers enforcing the requirements need to have substantial skin in the game. You have to own at least 2% of the shares of the company,, or for a public company the lesser of 2% or $2 million of equity.

Delaware current statute requires a 90% vote of all classes of stock to become a benefit corporation. Some states have set at 75% and some at 66%.

FEDERAL: Mark Prater, deputy staff director, chief tax counsel, Senate Finance Committee

Speaking for himself: "If I should say something controversial, I reserve the right to revoke it."

In 1986, the Tax Reform Act was in place.

Generally since the 1986 act, if a case has been made, the Hill has responded and made some incentives more generous. Took away 50% AGI limit for cash contributions to the tsunami in Southeast Asia. Pressure on the bond side for effective access to the bond market -- where rules have been relaxed.

Main point: On charitable side, there is very strong bipartisan premise that charitable giving serves very good social purpose. In some sense it takes pressure off the government to provide a lot of social services and in some cases it solves needs that would not otherwise be handled. Unlike a lot of tax policy areas -- the charitable field starts out with a lot of goodwill.

There is a lot of desire to simplify incentives for education savings.

Both panelists say there is little interest in federal (or Delaware) L3C legislation.

Q and A from audience

Are social enterprises competing for charitable dollars and will that cannibalize charities?