The Benefit Corporation laws are the nation’s first attempt at requiring businesses to create benefits for society and shareholders. The law addresses long-held concerns of entrepreneurs who are often torn between raising necessary growth capital and the fear of losing control of social or environmental missions. Ten states have adopted Benefit Corporation laws since Maryland paved the way in 2010. The registration list of new for-profit/nonprofit business hybrids is already meaty.
The Ben & Jerry’s Effect
Current business laws outside of these states require a public company’s board of directors to protect shareholder profit before any social or ethical mission. Ice cream gurus/social activists Ben Cohen and Jerry Greenfield of Ben & Jerry’s fell prey to this standard back in 2000 when multi-national food maker Unilever placed a bid on the company that was higher than its worth. Ben & Jerry’s was reluctantly sold under the guise of “shareholder responsibility” to Unilever for a reported $326 million.
In late-2005, London-based Unilever announced a return to roots campaign for Ben & Jerry’s hoping to revive the homespun ambiance that comes with supporting American family-owned farms. Such a change in direction has been labeled by social research consultants as basic risk management.
“Customers expect companies to act responsibly,” said Steve Lippman, vice president of social research at Trillium Asset Management in Boston. “Customers, employees and potentially investors can turn against you if they don’t like what they see.”
The new law will empower business directors to weigh the effects of their decisions on a string of variables including community, employees, environment, social mission and society as a whole. This reflects a clear departure from previous VIP standards that placed shareholder profits in center scope.
Businesses aiming to register and become certified as a Benefit Corporation should be prepared to meet the following standards:
- Complete impact assessment and supporting documentation.
- Create general public benefit in a material way.
- Publish annual benefit reports on website for public viewing in accordance with third-party standards.
Benefit Corporation laws come at a time when public trust in businesses is at an all-time low. Still, impact investing is on the rise with “do good and do well” flags waving at the mast.
For more information on registering your social good company as a Benefit Corporation, please check out B Corporation.
Do you think companies are becoming more social in nature?