Who does a corporation owe
responsibilities and duties to? Corporations that embrace social responsibility
want to increase profits to satisfy their shareholders, while giving back to
communities, and improving society as a whole. In today’s world, being green or
environmentally friendly, is not only seen as a lifestyle, but many companies
are seeking to change the way in which their business is conducted to be
socially responsible. Familiar companies such as Kickstarter, Patagonia, Warby
Parker, and even Ben & Jerry’s have entered the do-good realm. In fact,
state legislation has been introduced, in which a new legal entity may be
incorporated as a benefit corporation.
Lynn Stout,
a Corporate and Business Law professor at Cornell Law School, argues that,
“shareholder primacy is a ‘myth.’” Stout’s book,
The Shareholder Value Myth: How Putting
Shareholders First Harms Investors, Corporations, and the Public, opposes
the well accepted idea that corporations are required to, “maximize shareholder
value.” Alternatively, individuals such as Leo E. Strine, Jr., of the Delaware
Supreme Court, have argued
that it is, “not only hollow but also injurious to social welfare to declare
that directors can and should do the right thing by promoting interests other
than stockholder interests.”
Numerous articles
interchange the labels, “Benefit Corporation,” and “B Corp.” While both have
similar goals, they are in fact, separate models that have specific
distinctions. B Corp is a certification awarded to companies that have been
certified by B
Lab. B Lab was founded in 2006 by a group of founders with the goal to,
“build a global community of Certified B Corporations who meet the highest
standards of verified, overall social and environmental performance, public
transparency, and legal accountability.” In order to meet certification, there
is a performance Assessment.
In addition, there are legal requirements in which it may be necessary to amend
the governing documents and/or adopt benefit corporation status to meet legal
requirements for some states.
Although B
Lab has made major growth within this certification process, they have also
been working towards the larger goal of changing legislation overall. In 2010,
the beginning stages of this goal were reached, when Maryland became the first
state legislature to pass a Benefit Corporation Act. This new law has allowed
corporations to ensure that their, “mission-driven
businesses are held accountable and operate transparently.” This is done by filing annual reports, which
specify their social impact. In addition to increasing profits, when corporate
leaders are making decisions, their fiduciary duties now require them to
consider the social and environmental impact that they may have. Since 2010, 30
other states and the District of Columbia have passed similar legislation
in order to recognize Benefit Corporations. While most of these state statutes
are similar to Maryland’s statute, others have made deviations. For example, Connecticut
allows business owners the choice of, “legacy
preservation.” This option provides that despite change in the ownership of
a company or the structure in which it may operate, the corporations overall
mission to positively impact society, will remain.
Arguably,
society is benefitting from the new social approach of incorporation and
certification available to companies. While skeptics argue that benefit
corporations are not succeeding in their goal of large-scale societal impact,
there can be no argument that the mission of these corporations to have a
larger influence is commendable.
For further information about the
differences between a Benefit Corporation and a B Corp, please see this
helpful chart.