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