Benefit Corporations

Yesterday, I stopped in a large bookstore in Hot Springs and browsed a bit. The selection of magazines was extensive, covering an enormous array of topics from music to archery and quilting to mathematics. I skimmed a few but settled on a copy of The Humanist because it included an article about benefit corporations, a topic in which I’ve begun to develop an interest.  My interest goes beyond just benefits corporations; it extends to corporate behavior in general and ways it can be improved.

The author of the piece, John Montgomery, is a Silicon Valley based attorney whose practice focuses on corporate law. He also is the author of Great from the Start: How Conscious Corporations Attract Success.

Montgomery argues (though I didn’t need convincing) that traditional corporations are driven strictly by motivations to maximize profit and serve the financial interests of their shareholders, with no consideration given to the impact corporate actions may have on society and our planet. Essentially, he suggests corporations have no conscience, so soul, no heart…they are driven by greed. In this short article, he explains how this came to be and how corporations’ drive for profit today results in their legally but unethically dodging taxes, wreaking havoc on the environment, and shredding the lives of people worldwide.

He advocates for benefits corporations, as do I. If you are unfamiliar with benefits corporations, here’s a quick summary: their charters require them to have a corporate purpose to create a material positive impact on society and the environment. They are required to consider how their decisions impact not only on shareholders but also how they affect workers, the communities in which they do business and sell their products or services, and the environment. Finally, they are required to make publicly available an annual benefit report that assesses their overall social and environmental performance against a third party standard.

Montgomery quotes the “Declaration of Interdependence” of B Lab, a nonprofit that promotes corporate responsibility:

We hold these truths to be self-evident:

  • That we must be the change we seek in the world.
  • That business ought to be conducted as if people and place mattered.
  • That through their products, practices, and profits, businesses should aspire to do no harm and benefit all.
  • To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.

B Lab administers and confers the Certified B Corporation designation, but not all benefits corporations are certified (there is no requirement for that).  Benefit corporation status is conferred by states and is only available in states which have passed authorizing legislation. The Certified B Corporation designation is available in every state to corporations that achieve a verified minimum score of 80 out of 200 possible points on a proprietary (by B Lab) assessment.  There are more Certified B Corporations (1000+) than there are benefits corporations (fewer than 800).

Since the first benefits corporation law was passed in 2010 (in Maryland), about 800 corporations in the United States have become benefits corporations.  Other states that have passed benefits corporation laws include:

  • Arkansas
  • Arizona (effective at the end of 2014)
  • California
  • Connecticut (effective in October 2014)
  • Colorado
  • Delaware
  • Florida (passed, awaiting governor’s signature, to be effective July 2014)
  • Hawaii
  • Illinois
  • Louisiana
  • Massachusetts
  • Minnesota (effective 2015)
  • Nebraska (effective July 18, 2014)
  • New Jersey
  • New York
  • Nevada
  • New Hampshire (effective January 2015 if governor signs bill and she says she will)
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Utah
  • Virginia
  • Vermont
  • Virginia
  • Washington, DC

Legislation is pending in another dozen or so states.

Wouldn’t it be nice if the shareholders of ExxonMobile voted to follow suit? I am not holding my breath.   But it would be nice for people to become aware of benefits corporations and corporations that have achieved the Certified B Corporation designation.  I don’t know of a way to search for benefits corporations, but it is possible to search for Certified B Corporations; go to this site.

About John Swinburn

"Love not what you are but what you may become."― Miguel de Cervantes
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2 Responses to Benefit Corporations

  1. John Swinburn says:

    If we’re talking about turning society on its head, I agree with you, Juan. But in the absence of revolution, I like the idea of benefit corporations. You communist! 😉

  2. juan says:

    I’ll be honest with you. Call me a communist if you like, John, but I don’t like the idea of corporations — in any way — in control of our lives.

    Frankly, what we really need as head is a real “trust-buster” — a “corporate buster.”

    Business should be initiated, processed, and worked through social, governmental, “people-in-control” management.

    Very simple for me!

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