Purpose and Nonprofit Enterprise with Cathy Hwang

Add to Calendar: Add to Calendar: 2025-02-04 16:30:00 2025-02-04 17:30:00 Purpose and Nonprofit Enterprise with Cathy Hwang Event Description Nonprofit enterprise is responsible for a large share of economic activity across the globe. And yet, leading theories fail to explain why nonprofit business survives and even thrives across a vast number of industries, ranging from artificial intelligence to beer brewing, despite an absence of shareholder control. Indeed, as shareholder ownership and intervention rights have become the core component of successful corporate governance, this success is all the more surprising. We offer a novel “purposeful enterprise” theory to explain the puzzling success of nonprofit enterprises. Drawing on research in behavioral economics and organizational science, we argue that organizational purpose can serve as a substitute for shareholder control and monitoring, by mitigating managerial agency costs and aligning employee incentives. Nonprofit enterprise may also promote value creation by improving the stability of the entity. Our theory clarifies why nonprofit businesses and other related purposeful enterprises have thrived in certain industries and not others. It also sheds light on fundamental debates in corporate law, including that of the corporation’s purpose in society. In particular, it suggests that shareholder ownership and control is not the only means of addressing agency costs and improving organizational efficiency. Speaker Bio Cathy Hwang joined the law faculty of the University of Virginia in 2020, becoming the first Asian woman to hold a tenured position at the law school. Her research and teaching focus on business law, including mergers and acquisitions, corporate contracts and corporate governance. During the 2022-23 school year, she was the director of the John W. Glynn Jr. Law and Business Program at the law school. Five of Hwang’s articles have been voted by business law professors as among the top 10 corporate and securities articles of the year. Her work has been published in the Columbia Law Review, California Law Review, University of Pennsylvania Law Review, Virginia Law Review, Northwestern University Law Review and Cornell Law Review, among others. She is the co-author of “Business Associations: A Modern Approach” (Foundation Press, 2023). Prior to joining the Virginia faculty, Hwang was on the faculty of the University of Utah, where she received the University Early Career Teaching Award, which is the highest teaching honor for pre-tenured faculty members at the University of Utah, as well as the College of Law’s Early Career Faculty Award. She has also served as an academic fellow at the Rock Center for Corporate Governance, a joint initiative of Stanford Law School and Stanford’s Graduate School of Business, and as a visiting faculty member at the University of California, Berkeley. In 2022, Hwang was appointed a research member of the European Corporate Governance Institute. In the 2022-23 school year, she will be visiting at the University of Florida Levin College of Law. Hwang received her undergraduate degree in economics and international relations from Pomona College and her J.D. from the University of Chicago Law School, where she served as the managing editor of the Chicago Journal of International Law. Prior to academia, she practiced in the mergers and acquisitions group at Skadden, Arps, Slate, Meagher & Flom. Case Western Reserve University School of Law George Gund Hall Room A59, Moot Courtroom 11075 East Blvd., Cleveland, OH 44106 School of Law School of Law America/New_York public