Social Enterprise Governance Post-SOX.

Social enterprises—nonprofit and for-profit businesses that use market-based strategies to achieve social change for marginalized populations—demonstrate a new paradigm for doing business in the United States. The Sarbanes-Oxley Act of 2002 (“SOX”), which transformed financial reporting and heightened internal controls for public companies, has, perhaps unintentionally, also had an outsized influence on the development of social enterprise governance. The primary impact of SOX is found in the state-level auditing and reporting reforms imposed on large nonprofits. Moreover, “benefit reports,” the lynchpin of social enterprise state legislation, also mirror the SOX emphasis on transparency through third-party assessment. This article outlines those reformist and legislative SOX-inspired efforts targeting the mission-driven sector, within which nonprofit and for-profit social enterprises reside. This article also explores how social enterprise governance could further develop by learning from twenty years of SOX successes, criticism, and legislative modifications. [ABSTRACT FROM AUTHOR]