ABC Foundation (the “Foundation”) is a private foundation in a major city in the United States. The Foundation has been renting office space in the city’s commercial district, for which it has entered into a lease with an unrelated third party at a market rate. The Foundation is expanding, and its staff requires additional space, actively seeking office space in the local area. One of the Foundation’s directors informs the Executive Director that his son owns a building in the heart of the commercial district and is willing to rent office space to the Foundation at a significantly discounted rate. Aside from the steeply discounted rent, the Foundation would reimburse the director’s son for its share of janitorial services. The Foundation’s Executive Director signs a lease for office space with the director’s son and has paid the necessary deposits.  

On its face, this hypothetical appears harmless. The Foundation stands to gain a significant financial benefit. Although it seems advantageous, this hypothetical contains a number of prohibited transactions under the United States Internal Revenue Code (the “Code”) known as acts of self-dealing. Before I explore why, let’s review the basics.

Self-dealing involves any direct or indirect transaction between a private foundation and a disqualified person that personally benefits the disqualified individual. The rules governing such transactions are meant to prevent insiders from improperly benefiting from the foundation’s assets.

More specifically, section 4941 of the Code imposes an excise tax on any “disqualified person” who engages in self-dealing with a private foundation and any foundation manager involved in such self-dealing. An initial tax of 10% of the transaction amount is applied to the disqualified person, while the foundation manager faces an initial tax of 5% of the same amount. If the self-dealing is not corrected, it results in a second-tier tax of 200% on the disqualified person and 50% on the foundation manager.

What is Self-Dealing?

Under section 4941 of the Code, the following transactions constitute acts of self-dealing. 

1. Sale, Exchange, or Leasing of Property

Any sale, exchange, or leasing of property between a private foundation and a disqualified person is considered self-dealing. 

2. Lending of Money or Other Extension of Credit

The lending of money or other extension of credit between a private foundation and a disqualified person constitutes self-dealing. However, loans without interest or other charges from a disqualified person to a foundation are exceptions if the proceeds are used exclusively for charitable purposes.

3. Furnishing of Goods, Services, or Facilities

The furnishing of goods, services, or facilities between a private foundation and a disqualified person is self-dealing unless they are provided by the disqualified person to the foundation without charge and used exclusively for charitable purposes.

4. Payment of Compensation

Payment of compensation or reimbursement of expenses by a private foundation to a disqualified person is self-dealing unless it is for “personal services” that are reasonable, necessary, and not excessive.

5. Transfer or Use of Income or Assets

 Any transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation is self-dealing. This includes transactions that affect the price of securities to benefit a disqualified person.

6. Payments to Government Officials

Agreements by a private foundation to make payments to government officials are self-dealing, with certain limited exceptions for specific types of payments such as scholarships or awards.

It’s important to understand that the self-dealing rules apply regardless of whether the transaction benefits the private foundation. There is also no minimum threshold—even minor transactions can trigger a violation.

Common Inadvertent Acts of Self-Dealing

Private foundations can inadvertently engage in self-dealing when attempting to operate efficiently or fulfill their charitable mission—often without realizing they’re crossing legal boundaries. Here are five common self-dealing transactions that foundations most commonly run afoul of.

1. Paying personal expenses of a disqualified person
2. Leasing office space from a disqualified person 
3. Loans between a foundation and a disqualified person
4. Excessive or improper compensation to a disqualified person
5. Improper use of foundation assets by a disqualified person

Who is a Disqualified Person?

Generally, a disqualified person regarding a private foundation is anyone or any entity that has significant influence over the foundation’s activities or finances, or who might improperly benefit from the foundation’s assets.

More specifically, section 4946(a) of the Code defines “disqualified persons” (for purposes of the self-dealing rules) as any of the following. 

1. “Substantial contributors” to the foundation. 

2. Owners of more than 20% of the (i) total combined voting power of a corporation, which includes voting power represented by holdings of voting stock, actual or constructive, but does not include voting rights held only as a director or trustee; (ii) profits interest of a partnership; or (iii) beneficial interests of a trust or unincorporated enterprise; if the corporation, partnership, trust or enterprise is a “substantial contributor” to the foundation.

3. Certain foundation managers

4. Family members of any individual described in paragraphs 1, 2, or 3 above. 

5. Corporations, partnerships, trusts, or estates in which persons described in paragraphs 1, 2, 3 or 4 above own more than 35% of the total combined voting power, profits interests, or beneficial interests, respectively.

6. Government officials

Under the Code, a foundation manager is an officer, director, or trustee of a private foundation (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the foundation). Generally, independent contractors, such as lawyers, accountants, and investment managers and advisors, acting in their respective capacities as such, are not considered officers of the foundation they advise. 

The Code defines “family members” as spouses, ancestors, lineal descendants, and spouses of lineal descendants of substantial contributors, foundation managers, and 20 percent owners. Legally adopted children of an individual are the lineal descendants of the individual under this definition. The notable exception here is siblings. Siblings of anyone in the first three categories are not considered disqualified persons.

Key Exceptions to the Self-Dealing Prohibition

Although the self-dealing rule is broad, there are several important exceptions to it.  These include the following.  

1. A disqualified person can loan funds to a private foundation provided the loan is without interest or charge and the proceeds are used exclusively for charitable purposes. 
2. The furnishing of goods, services, or facilities by a disqualified person to a private foundation is not an act of self-dealing if the furnishing is without charge and if the goods, services, or furnished facilities are used exclusively for charitable purposes. 
3. In addition, the furnishing of goods, services, or facilities by a private foundation to a disqualified person is not an act of self-dealing if such furnishing is made on a basis no more favorable than that on which such goods, services, or facilities are made available to the general public. 
4. A foundation’s sharing of office space, equipment and supplies, support staff, and group insurance with a disqualified person is not an act of self-dealing when the foundation contracts with and pays for such services, etc., directly to lessors and vendors who are not disqualified persons. 
5. Generally, naming opportunities and favorable publicity that benefit a disqualified person due to the private foundation’s payment or grant are considered incidental and tenuous benefits that do not give rise to an act of self-dealing.
6. The payment of compensation (and the payment or reimbursement of expenses) by a private foundation to a disqualified person for personal services that are reasonable and necessary to carry out the exempt purpose of the private foundation is not an act of self-dealing if the compensation (or payment or reimbursement) is not excessive. For example, legal services and investment counseling are considered personal services; however, it is prudent to consult with legal counsel to determine what types of services can be considered personal services.

Correction

The Code allows a private foundation to “correct” an act of self-dealing by undoing the transaction to the extent possible, but in any case, placing the private foundation in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards. Returning to our hypothetical situation, we can now re-evaluate which options would and wouldn’t be considered self-dealing.

The director’s son, who owns the office building, is a disqualified person in relation to the Foundation. Therefore, he cannot rent space to the Foundation for a fee, no matter how favorable the deal might be for the Foundation. Furthermore, the Foundation cannot reimburse the director’s son for the janitorial expenses; this would be considered self-dealing even though it is only paying its share of the expense. Had the Foundation paid its share of the janitorial services directly to the vendor, that may have been allowed. Several individuals and entities, including the executive director of the Foundation, and the son of the director, who owns the building, could face excise taxes.

In Closing

Sometimes doing a good deed isn’t that simple. Given the complex and extensive tax rules that govern self-dealing transactions, foundations and their disqualified persons should proceed cautiously and seek proper tax guidance before engaging in transactions with disqualified persons.

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While there is no actual codified definition, MRIs are generally understood to be risk-adjusted or “prudent” market-rate investments.  It is a financial vehicle made out of the organization’s investment assets (e.g., its endowment) rather than its program assets.  Unlike its counterpart, the Program Related Investment (PRI), which has the primary goal of accomplishing a charitable purpose, an MRI seeks to generate a market rate of return on capital while also furthering a social purpose.  Put another way, PRIs offer solutions where the markets do not have a solution, while MRIs use the power of the market to create impact. 

It’s important for foundations seeking to establish their investment strategy to understand the key legal and structural differences between PRIs and MRIs.  Since the requirements to qualify as a PRI are more stringent than an MRI, a PRI avoids being classified as a jeopardizing investment, and can be counted towards a foundation’s annual distribution requirement.  

An MRI, on the other hand, is a commercial investment that also has a goal to create social impact but is not subject to the stringent standards of the PRI.  Consequently, an MRI does not count towards a foundation’s annual requirement and is not excluded from the rules governing jeopardizing investments.  In addition, in calculating the amount of a foundation’s five percent annual distribution requirement, MRIs are not excluded from the foundation’s assets, as is the case with PRIs. (For an in-depth discussion of PRIs, please read Are You Looking to Make an Impact? Consider a Program Related Investment).  

While the rules governing the MRI are not as rigid as those governing PRIs, there are a few key ones that MRIs must comply with. The “Jeopardizing Investments” rule, found in Section 4944 of the Internal Revenue Code (“Code”), imposes an excise tax on private foundations that invest “any amount in such a manner as to jeopardize the carrying out of its exempt purposes.” A private foundation and its management may be subject to excise taxes for making a jeopardizing or imprudent investment.  Because the Jeopardizing Investments rule applies to MRIs, MRIs must be comprised of prudent investments.

MRIs must also comply with the “Excess Business Holdings Rule.” Section 4943 of the Code states that a foundation, together with its disqualified persons, may own no more than twenty percent of the voting stock of a business enterprise (some exceptions may apply). 

Since MRIs are not treated as a charitable activity but rather as commercial investments, they must meet the prudent investor standards under state and federal law.  The applicable State-enacted version of The Uniform Prudent Management of Institutional Funds Act (UPMIFA) applies a standard for prudent investments whereby “each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.”  In addition, UPMIFA lists a number of factors that must be considered, if relevant, when making an investment.  Most states have adopted a form of UPMIFA. 

Developing an MRI Strategy

The board of an organization that is considering embarking on an MRI strategy should, as a matter of good governance, consider its rationale. Whether as a stand-alone policy or a policy that is incorporated into the organization’s investment policy, drafting a written MRI Policy should be the board’s first step.  The discipline of drafting an MRI policy will ensure that everyone is in agreement when it comes to incorporating MRIs into the overall investment strategy. 

The substance of the MRI Policy will depend in part on the organizational view of MRIs and their purpose.  Some may view MRIs from a programmatic standpoint, wherein the MRI serves as a tool available to the organization in implementing its philanthropic strategy.   Other organizations may view MRIs from an investment perspective and consider it as an opportunity to make a market rate investment that also happens to foster social impact.    

The following is a list of important questions that should be asked when drafting an MRI Policy. 

• Why Does the Organization Want to Make an MRI? 

It’s helpful for an organization to consider what it believes is the key objective for entering into an MRI strategy.  The organization should consider what it hopes to accomplish by making an MRI.  If the full board is in agreement regarding the rationale or objectives for entering into MRIs, it will help support the development of a uniform set of metrics used by the organization when assessing the success of MRIs in achieving those goals.

• Does the organization have the skills and staffing within the organization to carry out an MRI Strategy?  

In order to implement an MRI, organizations will need to rely on individuals with various expertise including investment, programmatic and legal experience.  Executives and the board should determine whether they can utilize in-house staff or board members, or whether they should consider engaging consultants.

The board should take into consideration if it will require a legal opinion that the potential MRI does not qualify as a jeopardizing investment. The size of the MRI relative to the organization’s investment portfolio may be a factor for consideration when determining whether a legal opinion is warranted.  

• Who will be responsible for oversight?  

Prior to entering into an MRI strategy, the board should consider who will be responsible for oversight of the strategy.  If the organization is considering the MRI as a key tool in accomplishing its philanthropic objectives, it may make sense to have both an advisor with programmatic experience as well as one with investment experience onboard. 

On the other hand, if the foundation views the MRI primarily as a market rate investment that also has social impact, a person or committee with investment experience, guided by a board-approved statement of social impact objectives, may suffice.  The investment committee of the board may be an appropriate oversight body for this responsibility when aligned with the foundation’s MRI objectives.  

• What will the balance be between investment risk and social return?

In advance of embarking on an MRI strategy, the board should determine whether it is willing to take a greater financial risk (while still complying with UPMIFA) to the extent the social returns of the investment have the potential to be great.  It may be that, regardless of the potential for social impact results, the board’s appetite for investment risk will remain the same.   Making a riskier investment may require altering existing investments within the organization’s portfolio in order to comply with UPMIFA’s requirement that each individual investment be reviewed in the context of the entire portfolio, in accordance with prudent investor standards.   

Consider the scenario in which the financial rewards are substantial, but the social impact is not as significant.  The answer to these questions will largely depend on how the Board views mission-related investing and why it has decided to enter this arena.  A board would be well-advised to determine in advance of entering into an MRI how it feels about risk and what the appropriate balance is in guiding its MRI strategy.  

• How will the organization measure the success of a Mission Related Investment? 

In reviewing the performance of an MRI, members of the board and management of the foundation should discuss how they intend to measure success.  The foundation could establish that success is based on the investment generating a minimum level of return, while achieving a loosely defined social impact.  For example, investing in a clothing manufacturer that uses environmentally friendly dyes for its fabrics could result in generous returns to its investors but only modest results in terms of reducing harmful environmental impact.  

With a benchmark focusing significantly on market rate returns, an investment that generates modest financial returns but generates substantial social impact may be considered unsuccessful because the return on investment was too low.  The members of the board should consider how much of a social impact they are looking to make through any MRI.   

In Conclusion

The philanthropic sector has come to understand that aligning investments with mission and values can be financially rewarding.  A greater number of foundations have decided to take a portion of their endowment and invest it in ways that align with their mission. Some have decided to invest their entire investment portfolio or endowment in line with their mission.

I predict that in the next few years we are going to see a dynamic shift in the way funders and their boards view their fiduciary obligations. Foundations contemplating entering into MRIs would be well advised to create a policy that articulates how MRIs can be thoughtfully carried out to achieve the desired investment and social objectives.

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What is a PRI?
A PRI is a type of investment made by a private foundation with the primary goal of accomplishing its charitable mission.  It can take many forms, including equity, debt or a loan guarantee.  PRIs were codified as part of the US Tax Reform Act of 1969. This landmark legislation changed the regulatory landscape for private foundations in many ways.  Under the terms of the Act, certain excise taxes are imposed on private foundations for making “jeopardizing investments”, which are investments that jeopardize the foundation’s ability to carry out of its exempt purposes. However, the Act specifically carved out PRIs as an exception to the jeopardizing investment rules.

PRIs are treated more favorably than other types of foundation investments.  Unlike non-PRI investments, PRIs count toward the private foundation’s annual requirement to distribute, for charitable purposes, an amount equal to 5% of the fair market value of its assets,  other than those which are used (or held for use) directly in carrying out a foundation’s exempt purpose (known as the annual minimum distribution requirement).  This treatment reflects the view that PRIs are more akin to grants as they are motivated by the goal of accomplishing the foundation’s mission without regard to their return on investment.

Foundation managers looking to expand their impact may find that PRIs offer significant advantages over traditional grant-making. For example, grants are not repaid, whereas PRIs allow private foundations to make an impact, while generating some degree of financial return that can be recycled for use in a future grant or investment, thereby deepening the foundation’s impact. Traditional grants are also generally limited to charitable grantees (e.g., public charities), whereas PRIs can be issued to any entity pursuing a project that aligns with the foundation’s mission, including for-profit companies.

How do PRIs work?
To better understand how a PRI works, consider this hypothetical:
X is a private foundation with the mission of creating better living conditions for those living in poverty.  X decides to make a $1 million loan to Y, an organization that builds affordable housing for those living below the poverty line in the city of Z.  The loan is made at a below market rate, meaning that X could receive a better interest rate if it invested the funds somewhere else at a market rate.    X is making the loan for the reason that the loan furthers its mission.  As a result of the loan made by X, other investors begin to make loans to Y as well.  As a result, Y is able to build thousands of affordable homes for individuals living in Z.  Eventually, Y repays the loan to X.  Because of the repayment, X is able to use those resources again to make other investments or grants that advance its mission.  The funds are recycled for future use.

How does an investment qualify as a PRI?
To qualify as a PRI, an investment must meet a three-pronged test:

• The primary purpose of the investment must be to further one or more exempt purposes of the foundation;
• The production of income or the appreciation of property may not be a significant purpose of the investment; and
• The PRI cannot be used to fund electioneering or lobbying activity.

The first two prongs of the test warrant further examination.  The first prong, commonly known as the “primary exempt purpose test,” is subjective in that it is specific to each foundation.  It is actually a two-part test.  First, the investment being considered must significantly further the foundation’s exempt activities.  Second, the contemplated investment must be such that the foundation would not make it but for its relationship to the foundation’s exempt purposes.

The second prong of the test states that the production of income or the appreciation of property cannot be a significant purpose of the investment.  This test is more difficult to prove and often generates some degree of confusion.  After all, it is not always easy to determine that return was not a significant motivator is making an investment.  The easiest example of an instrument that would pass this test would be a below-market loan to an organization.  However, PRIs are not limited to loans.  As the Internal Revenue Service and Treasury Department has indicated in previously issued guidance, there are a number of forms a PRI can take, including equity investments, and loan guarantees.  In the final regulations issued by the IRS regarding PRIs, a common element to all of the examples included is that they all have the ability to generate some degree of financial return.  The use of PRIs can be a very effective way of deploying philanthropic capital.

Who uses PRIs?
With all of the benefits of engaging in a PRI, it’s surprising to learn that many private foundations do not use PRIs.  In fact, according the National Center for Family Philanthropy, as of 2017, less than 2% of the country’s more than 87,000 foundations use PRIs.  The larger players in the philanthropic world use them regularly.  For example, the Ford Foundation, a widely recognized trailblazer in the sector, has established a $200 million dollar pool of resources within its endowment for use as capital for PRIs.  On an annual basis, it awards nearly $17 million in PRIs.  In 2020, the Gates Foundation allocated in excess of $10 million to PRIs. The largest foundations avail themselves of this strategic philanthropic tool regularly. But what about the others?  When PRIs are used in concert with more traditional means of philanthropy, it can lead to a more powerful strategy with greater impact.

If a private foundation determines that deploying capital through a PRI should be a priority, the foundation may need to allocate resources toward building a team with the financial and legal knowledge to engage in a PRI strategy.  Effecting a program-related investment requires a fairly significant level of due diligence in order to ensure that the criteria are fully met, and include expenditure responsibility oversight requirements similar to that required of certain foundation grants. In some instances, the use of third-party advisors may prove critical to an effective PRI strategy.  Given the potential for PRIs to have a multiplier effect on social impact, foundation board members and management who have not yet delved into the world of PRIs should consider evaluating whether impact investing through PRIs would enhance programmatic success.

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The Benefit Corporation

Thanks to relatively recent legislation in a number of jurisdictions, social entrepreneurs have the option of incorporating as a benefit corporation or public benefit corporation as it is known in Delaware.  Benefit corporation laws actually require a corporation to pursue a mission and to take that mission into account when conducting business.  Most jurisdictions require that the benefit corporation report to its shareholders about how it has been pursuing its mission, and some states require that report be made publicly available.  The benefit corporation does give its officers and directors a certain amount of protection when pursuing a company’s mission.  The officers and directors have the ability to focus on mission in addition to maximizing shareholder value.  However, the benefit corporation is a fairly new concept and is only now being broadly tested in the capital markets.  The recent initial public offering by Laureate Education is a prominent test case.  It is still too early to tell how the investing public will react to this new corporate entity.  It is also worth noting that Laureate Education may not be the best test case, since it has the advantage of being able to rely on the resources and network of its financial sponsors, which include private equity behemoths. Not all benefit corporations seeking to become public companies will have the backing of private equity sponsors.

Incorporating as a benefit corporation is one avenue of trying to enshrine social mission into a company’s DNA. But a close reading of these statutes reveals that they don’t actually require much. “Social purpose” is defined very broadly and is vague. And directors can fulfill their obligation by considering the social mission when making business decisions: they don’t actually have to do anything differently than they would if they were solely seeking profit. Finally, of course, is the fact that in certain jurisdictions a company can simply opt-out of the Benefit corporation designation with no consequences.

There are other alternatives available to the social entrepreneur to make social purpose intrinsic to the corporate structure without having to change a company’s corporate form.  Below we will discuss some of these methods:

Charters, Bylaws and Shareholder Agreements

One way to safeguard a social mission is to include mission related provisions in the organizational documents of a company – even a “regular” corporation or LLC.  The charter of a corporation can be drafted to contain provisions that authorize or require the organization to comply with a social mission.  A company’s bylaws can require its officers and directors to take social missions into account when performing their duties, just as they would be required to do with a benefit corporation.  For example, the bylaws of the company might authorize the directors and officers of a company that manufactures environmentally friendly products to take into account the environmental practices of their suppliers in addition to more traditional metrics like cost.

Shareholder agreements can also be used to embed mission.  A well-crafted shareholder’s agreement – essentially a contract between the corporation and the shareholders – can require the company to pursue a social mission in the course of carrying on its business, and prevent shareholders from trying to inhibit the pursuit of social objectives.  For example, shareholders agreements can be drafted to require a supermajority in order to alter provisions relating to a company’s mission, or to give non-consenting shareholders the right to sell their stock back to the company if the social mission is diminished.  Shareholder agreements can also mandate specific mission-related reporting to shareholders, and give the shareholders rights of inspection that they would not otherwise have.  Although, shareholder agreements can be amended over time, steps can be taken to make it harder to amend or remove provisions that relate to social purpose.

Capital Structure – Classes of Stock

For-profit corporations can also protect a social mission through the design of its capital structure.   For example, socially minded corporations can create multiple classes of stock that allow one class of shareholders (call it Class A) to receive one vote per share while shareholders in the other class (Class B) get several votes per share. In a common scenario, Class A stock will be held by the investors, and Class B stock will be held by the founder or others (including foundations) who give priority to the social mission and can use their voting power to protect the mission. A company can also issue a class of preferred stock that grants its holders certain rights that are different from those of common stock holders.  Those rights could include the ability to veto any policies or practices that would impair or diminish the company’s commitment to a social mission, including mission related provisions in a shareholders agreement (see above.)  In a slight variation of this approach, some social entrepreneurs have granted preferred stock to non-profit foundations.  Those foundations are able to take the company’s mission into account when exercising their rights as holders of preferred stock.

Third Party Certification

For brand focused industries, getting certified by a credible organization that develops certain standards for its members in areas such as worker impact, environmental impact or community impact can distinguish a business in a market place that is crowded with competitors all claiming to be “good” companies.  If a company is certified by such an organization, it has to maintain its standards in order to be re-certified. While being certified by such an organization does not necessarily embed mission into a company’s corporate structure, the possibility of not being recertified does make it harder to dilute any social or environmental values.  Some of these certifying organizations actually require companies to alter their governing documents in order to ensure that a corporation’s social values will endure changes in management, etc.  Many also argue that having this type of third party certification can help a social entrepreneur attract mission-driven or impact investors.  B Corp certification is an example of this type of third party certification.  Some well-known companies that use the B Corp certification include outdoor apparel manufacturer Patagonia and home products manufacturer Seventh Generation.  Other examples of third party certification include the Green Seal certification which is available to manufacturers of environmentally responsible products.  The Green Seal certification on a product helps purchasers identify products that are safer for the environment.  These are only two examples; there are numerous other standards that can be used as well.

Creative Alternatives for Safeguarding Mission

These are just the commonly used solutions to safeguarding mission.  There are other creative ways of requiring a company to adhere to its mission.  For example, lenders who are interested in social enterprise could insist on a maintenance covenant that requires the borrower to pursue its mission and provide the lender with certain quarterly metrics. Other options include restrictive provisions in long-term IP licenses, joint venture agreements, and other agreements that bind a company, make it accountable to outside interests, and are legally enforceable.

If creating enforceable legal obligations with respect to mission is important, there are a lot of tools available to the social entrepreneur or a group of investors to accomplish this.  It’s up to the company’s founders, officers and directors to pick the strategy that best fits their needs.  Sometimes one technique alone will not suffice, and a combination will be used. Experienced and knowledgeable advisors are a good place to start.

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The skeptics are now learning to never say never. Laureate Education Inc. has recently filed a registration with the United States Securities Exchange Commission for an initial public offering.  The company is a Delaware Public Benefit Corporation. Laureate is also a B Corporation, having completed the rigorous assessment and made the grade to certify as a B.

The corporation’s stated public benefit is to produce a positive effect (or a reduction of negative effects) for society and persons by offering diverse education programs online and on premises in the communities that they serve.  The initial public offering is being underwritten by some of Wall Street’s most prestigious names.  Even more striking is that Laureate Education is a portfolio company of KKR, the private equity behemoth. With KKR standing behind this IPO, there are bound to be many interested investors.

The underwriters as well as the company’s financial sponsors have taken the position that investing in a benefit corporation is, at the end of the day, no different from investing in a traditional corporation.  When the IPO closes, Laureate Education Inc. will likely become the first publicly traded public benefit corporation.  Once the first successful IPO of a benefit corporation occurs, who knows how many others will follow?  Perhaps the long-held proposition of the social entrepreneurship community that businesses can do well and do good at the same time will finally be fulfilled.

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