Now We’re Getting Somewhere – Introducing The B-Corp
In the business world, there’s been this tension between making money and doing good. At least for an emerging group of leaders. Sure, making money – being a viable enterprise – is exceedingly important. It’s hard to be an ongoing enterprise, enduring for the long-term, without effective revenue generation and cash flow management no matter how you structure things.
But more and more there are people who eschew (love that word!) the notion that business is only about profit. It used to be that business was not just about making money – for oneself or one’s shareholders – but also about adding value and doing something good in the world: innovating new, high-quality products that last longer than one season (or one year …), building infrastructure, providing real service, caring for people when they are sick or injured …. Indeed, the notion of the Social Enterprise has been around for a hundred years or more, originally representing work that incorporated a concern for employee welfare.
Yet, in the world of corporate law, for profit corporate officers can run into trouble if they engage in activity designed to do anything other than produce a profit, since their duty of loyalty is to the shareholders who funded the operation in hopes of getting the greatest return on their investment. This, of course, has led to making money as an end unto itself. And that focus has led to a lot of people dissatisfied with the jobs they go to every day, just to earn a buck without much in the way of personal or professional satisfaction.
And Now For Something New and Different.
Many of us in business are starting to consider that such return might come in the form of value other than a dollar, euro, ruble or yen (insert your other favorite monetary currency here). Those who consider themselves social entrepreneurs will be glad of this first: the Benefit Corporation, which made its debut in the state of Maryland recently. (See a report from Bloomberg Businessweek here: http://www.businessweek.com/smallbiz/running_small_business/archives/201...)
Rather than a primary focus on ’shareholder value’ (which is, simply, creating as much money as possible for corporate owners – the duty of those running a for profit corporation), the “B Corp,” like a true social enterprise, can lawfully focus on the needs of everyone connected to the company: shareholders, officers, staff, customers/clients, vendors, communities. That’s a very different focus. So long as the public or social benefit that may serve as the mission of the enterprise is clearly stated in the Articles of Incorporation (so investors know what that is and that their investment will not just be focused on money-making, but rather value-making and money-making), then the officers and management of the company can legally seek to confer such benefits on people other than shareholders. Reporting on the benefits conferred is also required. With shareholder approval, an existing for profit corporation can be converted to a Benefit Corporation.
Access a final draft of Maryland’s legislation and other resources here: http://mlis.state.md.us/2010rs/billfile/SB0690.htm (click on the Senate Bill 690 link at the top of the page). While the Maryland Secretary of State’s office governing corporate formation is not the most user friendly or accessible online resource, some searching will yield this page addressing business entities: http://www.dat.state.md.us/sdatweb/sdatforms.html
Here’s a summary of Maryland’s new law:
To be a Benefit Corporation, the enterprise “shall” have the purpose of creating a general public benefit. General public benefit means “a material, positive impact on society and the environment, as measured by a third–party standard, through activities that promote a combination of specific public benefits.” The charter of a Benefit Corporation may also identify one or more specific public benefits as part of its purpose. Listed specific public benefits in the law include:
(1) Providing individuals or communities with beneficial products or services;
(2) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
(3) Preserving the environment;
(4) Improving human health;
(5) Promoting the arts, sciences, or advancement of knowledge; or
(6) Increasing the flow of capital to entities with a public benefit purpose; or
(7) The accomplishment of any other particular benefit for society or the environment.
Identification of a specific public benefit, however, does not limit the obligation of a benefit corporation to create a general public benefit. Since my own personal legacy purpose includes a focus on environmental preservation, of particular interest to me is the requirement in the definition of “general public benefit” that the material, positive impact must be on society AND the environment. This is a keen recognition of our interdependence on this planet, what some would refer to as “oneness” or a holistic approach: that the economic impacts of business affect not only humans, but the planet we all live on (and presumably its other inhabitants). I applaud the Maryland legislature for its wisdom in this.
Not only can a B Corp create a public benefit, in doing so they must measure and report their beneficial results so that those efforts can be publically tracked. Think of it as a hybrid of the for profit and nonprofit corporation. Here’s an interesting example from the HuffingtonPost.com: http://www.huffingtonpost.com/birju-pandya/benefit-corporations-the_b_58...
Seems a bit sad that we had to carve out special legal definitions for this. But I’m glad Maryland broke ground with it. And of course, it’s still an election – in a free society we can’t go too far beyond criminal laws in legislating morality – and ethics is still defined as “obedience to the unenforceable.” But I’m hoping people will want to go on record as stating they work for money AND for meaning and good purpose. Seven other states are currently considering similar legislation: Pennsylvania, New York, North Carolina, California, Oregon, Colorado and Vermont.
An excellent summary and history of Benefit Corporation legislation, by lawyer William Clark of Drinker Biddle & Heath, LLP in Philadelphia, PA, is available here: www.ftc.gov/opp/workshops/news/mar9/docs/clark.pdf
A Non Profit Leads the Way
Maryland’s law is based on the work of nonprofit B Lab, a Pennsylvania company that certifies businesses committed to social responsibility (http://www.bcorporation.net/). They provide an Impact Assessment for those who aspire to run socially responsible operations, help them save money and raise capital, and give them a forum to meet other kindred spirits in business.
Jay Coen Gilbert, one of the co-founders of B Lab, feels there are more and more investors who want to invest their money in truly mission-driven companies. He was recently quoted in the Bloomberg Businessweek article saying: “I think it’s becoming increasingly not only acceptable but sought after by mainstream investors.”
That’s some good news for a change, eh?
This development may prove to be a big help to people seeking to develop certain types of legacy projects. Seems like a good option for many who might need to raise capital to get their project going rather than having to rely on raising charitable donations or using all their own assets, particularly where the latter are limited. We look forward to watching the development and stand ready to help you figure it all out in the context of your developing legacy.
Dolly M. Garlo, RN, JD, PCC, is President of Thrive!!® Inc. (www.AllThrive.com) and Founder of Creating Legacy™ (www.CreatingLegacyNetwork.com). After 16 years of law practice (www.GarloWard.com), her current focus is business development, strategic marketing design, professional career transition, social entrepreneurism, corporate social responsibility cultivation, and making a difference that lasts for generations.