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Consider becoming a B Corporation
By Lauren | July 2, 2010
Continuing my Friday series on keeping your business out of court, let’s talk about a new kind of corporation that may offer a safer vehicle for doing well while doing good. Let’s presume that you’re the head of a publicly traded company. You’re also something of a social activist, and you want to use your company’s assets to start a charitable foundation, contribute to the oil spill cleanup in the Gulf of Mexico, or otherwise build the common good.
This is the point where your lawyer might say, “not so fast …”
The problem you’d face is that there’s corporations are formed for only one primary purpose: to make money for their shareholders. If you can’t draw a clear connection between your proposed good works and the company’s bottom line - demonstrating that improved consumer good will is expected to boost sales, for example - you might find yourself facing a lawsuit from shareholders who think you’re wasting their money. It’s up to nonprofit organizations to save the world, right?
Not necessarily, or at least not exclusively. Maryland and Vermont have recently adopted legislation creating a new kind of company, called a “benefit corporation” or “B Corps,” that balances its bottom line against its contributions to society. A hybrid between a for-profit corporation and a nonprofit, the B Corps can attract investors like a publicly-traded corporation and still seek to do good works like a charity. In exchange for setting up socially beneficial goals in its charter and submitting to third party audit from time to time, a B Corp gets to do good work without worrying about wringing every last dime out of its balance sheet or having to defend every noble decision it makes to angry shareholders in court.
So, if you’re one of those rare, wonderful people who wants to do well by doing good, consider reconfiguring your company as a B Corps. You can save a little piece of the world and stay out of court at the same time.
Topics: Business Ethics, Corporate Governance, Lauren Recommends, Risk Management, business communications, corporate responsibility, ethics |
July 7th, 2010 at 12:24 pm
Lauren,
This is the first time I have heard about the idea of a ‘benefit corporation,’ but it sounds like a wonderful concept.
In normal companies, shareholders have every right to expect management to act in their best interest at all times, regardless of the social passions of individual managers.
If a company is to be run any other way than by maximisation of shareholder returns, shareholders have a right to know this out front. From what you have said, it sounds as though benefit corporations allow this, since shareholders invest in with the full understanding that profit maximisation is not the sole company objective.
A wonderful idea.