Since the idea of a corporation was first conceived centuries ago, the primary and fundamental legal duty of officers and directors of corporations has been to generate revenue for the corporation and dividends for the shareholders. An unfortunate consequence of a profits-only driven model is a growing public mistrust of corporations. The Wall Street Journal recently reported that 55% of the public think that the rich get richer and the poor get poorer. 65% of the public think most big businesses have dodged taxes, bought favors or polluted.
Some creative legal minds and activists have come up with a new kind of corporation – a benefits corporation or B Corp. B Corps define officers and directors duties as duties to all stakeholders, not just shareholders. Commentators have characterized B Corps as a “Force for Good.” Rather than focusing only on profits, B Corps also take into account worker impact, community impact, environmental impact, long term consequences for board decisions and the “core” business model.
In order to hatch the B Corp concept, enabling legislation was required in every State. In effect, with the profit duty paramount, the B Corp model cannot work under prior legislation and case law. Arizona has adopted B Corp legislation allowing a B corporation to be formed under Arizona law. The B Corp movement really got started when Delaware adopted B corporation legislation. At this time, over thirty states have B corporation legislation.
As part of this movement, rating organizations have emerged to evaluate how well a corporation performs as a force for good. The B Lab scores corporations based upon how well they perform for all of their stakeholders. If a corporation passes the evaluation, it can become “B certified.” In essence, this is a seal of approval which corporations can use as a marketing tool to demonstrate community involvement and awareness. The management of these B corporations are expecting that consumers are more likely to buy from a corporation that is a force for good within their communities.
Prominent examples of B Corps include Patagonia, the apparel company, New Belgium Brewing Company of Fat Tire Ale fame, Veris Wealth Partners and Ben and Jerry’s Ice Cream.
If you have any questions about B Corporations, please contact Jon Titus at 480-483-9600 or jtitus@tbl-law.com.
