Improving Capital Allocation To Social Entrepreneurs
ABSTRACT: Improving Capital Allocation To Social Entrepreneurs proposes a solution to what David Bornstein has identified as the biggest challenge to the continuing vitality of the citizen sector--capital allocation. Bornstein wrote in How to Change the World, “[c]apital is not being allocated to the most promising enterprises so they can grow.” I will propose overlaying the disclosure requirements that the Securities Act imposes on private sector enterprises to citizen sector enterprises. Sometimes the best way to solve a problem is by appropriating tools used in other areas of the law. The private sector (as opposed to the citizen sector) experienced a problem with capital allocation during the first two decades of the twentieth century, culminating in the Great Depression. The solution was the Securities Act of 1933 and the Exchange Act of 1934 (Securities Laws), which provided investors with information, and as such, allowed investors to better allocate funds to profitable corporations.