The L3C Big Picture

November 8, 2010; Source: New America Foundation | In a comment written in response to an NPQ Newswire addressing L3Cs, we mentioned Lucy Bernholz’s opinion that L3Cs and B-Corps were challenges to the nonprofit sector. By serendipity, Lucy published a piece through the New America Foundation which takes up the issue once again.

Here’s Bernholz’s quote: “The for-benefit corporation laws (B Corporations and others) and the L3C movement, are ‘shots across the bow’ for a new era of corporate law regarding the production of social goods. The creation of social finance and social investment exchanges and the ways these forces draw securities regulation into the equation for funding social goods is probably the next place we will see massive shifts in law and regulation. Intellectual property, the Creative Commons, and governance of and in the commons, are also areas of law, regulation, and practice that hold promise for how we collectively produce social goods and threats to the established norms of nonprofit practice.”

Her perspective is as a trained historian (Ph.D. from Stanford), raising questions not about whether L3Cs will or won’t achieve the promise that some think they hold. She is asking all of us to think about what these new-ish corporate forms, with characteristics drawn from the nonprofit and for-profit sectors, mean for the nonprofit sector, how they challenge, compete with, threaten, and perhaps potentially displace “established norms of nonprofit practice. She is asking the nonprofit sector to think about what these entities mean for nonprofits.

Are L3Cs a competitive yardstick for the nonprofit sector, the beginning of a subsequent more effective form for the production of social goods, or a fad that doesn’t and won’t amount to much? Bernholz asks her readers (and NPQ’s readers) to think about the big picture questions. Glad she does.—Rick Cohen

  • Robert Lang

    Both you and Lucy are right in that we should give thought to where new forms will take us. However, the “Law of Unintended Consequences” so often interferes with our attempts to chart the future. The externalities of what we do can be charted well in the past but are very unpredictable for the future. This is why we often need to just let new ideas play out. If they are cream they will rise to the top if not they sink to the bottom. We have raised the bar higher and higher for new ideas and we may be killing or trying to kill many of them before they have even had a chance. The biggest problem with over-anticipation is that we are usually wrong anyway.

    When TV hit the market the death of radio was widely predicted. Today NPR is in far better shape than PBS. Did anyone see the cellphone as a threat to safe driving or an instrument of cyber bullying and sextexting?When I first created the L3C I never saw it as an entrepreneurs start up vehicle I say it as a collaborative vehicle for foundations and other wishing to bring about social good through a for profit vehicle. I have change my mind. Although I still see it as that I also think in many cases the tail is going to end up waging the dog. Ordinary people are going to start them and operate them with a social purpose in mind and like most entrepreneurial ventures invite other investors in later.

    B Corps worry many because they see them as an instrument of greenwashing. But I think this will pass and the public will be able to identify those with positive goals and those who just wish to clean up their image.

    We can try but lets not spend too many nonprofit dollars trying to chart the unknown.