Care2 Victory! New York Law Establishes Benefit Corporations

Thanks in part to the many activists who signed this Care2 petition, a new law for New York authorizes establishment of Benefit Corporations with a dual focus on social responsibility and profits.

Governor Andrew Cuomo signed a law on Monday, December 12, creating a new legal category of company in New York : a Benefit Corporation. The companies that incorporate under the new law must prove they have social and environmental impact.

New York becomes the seventh state to enact the legislation, following Maryland, Vermont, New Jersey, Virginia, Hawaii and California.

Unanimous Bipartisan Support

The bill will go into effect in 60 days. Sponsored by Assembly speaker Sheldon Silver and state Senator Daniel Squadron, it passed with rare unanimous bipartisan support.

These companies, usually referred to as social enterprises, include clean technology companies that fight global warming with each solar panel sold, or a Fair Trade coffee company that fights poverty by buying directly from poor farmers, for example.

And Care2 itself is a Benefit Corporation!

While officers and directors of existing companies are required to pursue profits on behalf of shareholders, sponsors say the new model envisions other fiduciary responsibilities meant to have a positive material impact on society and the environment.

For-Profit Companies Can Have More Social Impact

It is meant in part to address concerns among some entrepreneurs who need to raise growth capital but fear losing the social or environmental missions of their business.

From WYNC news:

Squadron argues the law will enable for profit companies to have more social impact. “Right now companies are handcuffed because they need to return the highest profit for investors and can’t also return social benefit for society” he said. “Under Benefit Corporations they will be able to…pursue a double bottom line of financial and social benefit.”

Benefit Corporations have a few key differences from traditional corporate forms, like the C Corp or S Corp, which require a company to maximize return to shareholders over any other goal, including environmental concerns.

Instead, Benefit Corporations will be required to consider in management decisions the impact on the environment, community and employees along with profit to shareholders. That gives a founder or CEO a legal defense against investor claims.

Subject To Third Party Monitoring

Benefit Corporations in New York will have to submit to third party monitoring on at least one kind of non-financial benefit they provide to society. The law does not mandate which cause or which third party certification organization, something that the New York City Bar association has raised concerns about because it could put corporate boards of directors in difficult positions.

The bill passes unanimously in New York’s House and Senate. We can only imagine when that might happen in our nation’s capital.

Thank you, Care2 supporters!

California Can Lead On Socially Responsible Businesses

Photo Credit: New York NOW

quick poll

vote now!

Loading poll...

no!
leaning no
leaning yes
yes!

no!
leaning no
leaning yes
yes!

Disclaimer: The views expressed above are solely those of the author and may not reflect those of
Care2, Inc., its employees or advertisers.

Mofizuddin x.

8:05PM PST on Dec 28, 2011

Overall it is a good idea but there is too much room for manipulating the required conditions for running a Benefit Corporation. In my opinion, the benefit objective should be specifically defined in more detail and a set of criteria should be applied to measure the eligibility of this corporation.

send a green star

Vivianne M.

5:17PM PST on Dec 28, 2011

since corporations cause the most pollution....this makes sense.

Margaret P.

7:41AM PST on Dec 25, 2011

Have to agree with Jason. It is just human nature for some to be greedy and uncaring - look at the politicians who set such a bad example for the nation year after year.

It is a wonderful goal to set for any state and it certainly could help to improve conditions. I hope they succeed so they set an example for the rest. Actually if each community worked harder at it it could spread statewide.

I think most 501(c) 3 corps. donate to good causes and this Benefit Corp. might help to really promote that but it means some hard financial choices for some so I hope the state is going to provide ideas as well as perhaps informative conferences or references for those seeking to change. Since they have created this category they have a responsibility to assist.

Barbara D.

5:02AM PST on Dec 25, 2011

Yes, Thank You New York. Ohio, we are next.

Elena S.

9:58PM PST on Dec 24, 2011

Thanks!!!

Manuela C.

5:58PM PST on Dec 24, 2011

A positive step, NY!

Sharon S.

5:28PM PST on Dec 24, 2011

Only time will tell......

Sue T.

1:40AM PST on Dec 23, 2011

so what does this mean exactly? I read the article 2 tiimes and I am not sure why this needed a law to be passed? Is this more political pandering for "feel good" issues that really mean nothing?

Dave D.

1:51PM PST on Dec 21, 2011

I think all corporations should be B corporations. Contrary to what others say about the regular corporation structures, profit may be the primary motive, but they are supposed to earn that profit legally, which means following environmental, labor and other laws. Unfortunately, many don't and they leave the Commons–air, land and water–polluted, employees often times exploited or unemployed. Why should they make all the profits while leaving the Commons polluted, people, both employees and consumers either unemployed, unhealthy due to pollution or overwork or dead. It's time the government stood up to these ne'er-do-wells for the sake of our commons and the majority. If business continues to get away with all the profits and little responsibility, it's just going to be more of the same.

Eternal G.

6:50PM PST on Dec 20, 2011

Sounds good...