Full story click here: http://www.mercurynews.com/business/ci_19109459?source=rss
California is the latest state to adopt a statute, Frontline SMS took another route and organized as a community interest company, or CICs, the British corporate designation that has inspired many of the new hybrid incorporation laws passed in the United States
John, It's the L3C model which was conceived as a business with a social objective which could 'tap charity' as the article puts it. More accurately it was designed to attract what are known as Program Related Investments, or PRIs, where foundations are required to observe a market return on any project they may invest in, by law.
The PRI constraint will be found described in the 1996 paper on an alternative to traditional capitalism which describes the proposed business model:
"The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a charitable, non-profit organization whose proceeds go to local, national, and international charities. Non-profits, however, are typically very restricted in the type of business they can conduct. In the United States, all non-profits must constantly pay heed that they are not violating those restrictions, lest they suffer the wrath of the Internal Revenue Service. For-profits, on the other hand, have a relatively free hand when it comes to doing business. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders. "
The model was introduced to the UK in 2004 with a business plan and introduced to the chair of the SEC in 2005
The author, my colleague Terry had been one of the first to challenge capitalism as an insufficient economic paradigm and first deployed his model in a proof of concept initiative which introduced social enterprise and moral collateral based microfinance to Russia with the Tomsk Regional Initiative. It was a response to the failure of "trickle down" capitalism which led to their economic crisis of 1998
He challenged capitalism over the disposability of human life and went on to challenge organised crime and government over the same issue. As an American without healthcare insurance he too became a victim of capitalism
BY placing his work in the public domain , he intended that the model be free to use for social benefit.
In both the original model and the 2004 business plan, he describes a process of perpetual community re-investment which had not featured in the CIC definition but appeared more recently described as the concept of 'revolving finance'
His most prominent work describing a social business strategy and social investment fund for national scale economic develpment re-appeared recently in the form of an EU consultation. As the same concept had been offered to the EU 4 years earlier.
Now that he's died fighting for what he believed to be just, hopefully the world of social enterprise will be big enough to attribute him with his intellectual property such that it's used for the purpose intended.