8 States Now Allow Corporations to Do Good
I learned some scary things in law school, but the worst was that corporations have a legal obligation to maximize profit for their shareholders. Even if corporate leaders want to do good things like revamp operations to be more environmentally friendly, enact fair trade practices, or invest in policies to enhance employee satisfaction, they can’t without showing how the changes will benefit stock owners.
Add to that corporations’ status as (by definition) money-grubbing citizens with enormous influence on our politics and governance, and you should be scared too.
A relatively new corporate form is riding to the rescue by allowing certain corporations to pursue goals other than making bank for their owners. They are called Benefit (or simply “B”) Corporations. This corporate structure allows social entrepreneurs to incorporate but retain their social values and missons.
According to the website bcorporation.net, unlike traditional businesses, B corporations:
1. Meet comprehensive and transparent social and environmental performance standards;
2. Meet higher legal accountability standards;
3. Build business constituency for public policies that support sustainable business.
This month, Louisiana became the first Southern state and the eighth state overall to permit B Corporations. (The other states that have legalized the B Corporation form are New York, Maryland, Vermont, New Jersey, Virginia, Hawaii and California.) According to a press release from the New Orleans Business Alliance, “The legislation makes it possible for Louisiana companies targeting social and environmental return to place as much priority on these objectives as is placed on profit. This allows directors and officers more flexibility in their decision-making and gives socially conscious investors more assurance that their money will be used as intended.”
It also helps social entrepreneurs raise more money by selling so-called “impact investors” shares of their organization, rather than relying on donations as many non-profits do.
Rest assured that the website you are reading now, Care2.com, is a Benefit Corporation!
For more information, visit B Corporations.