They share a common goal: reduce corporate greed and increase social benefit.
They share an anniversary: October 9, 2011. AB361 was signed into California law while Occupy Oakland was setting up camp.
Occupy Wall Street and Occupy Oakland have dominated national and local news. Quietly, another coalition of organizations has been working to address the root of discontent with Wall Street and large corporations. Where they differ, and starkly, is in their tactics. While the Occupy movement is loosely structured, with a laundry list of concerns, and offering no clear solutions, the Benefit Corporation movement is laser-focused on changing the legal contract between the parties with the power: corporate directors and shareholders.
San Francisco Supervisor David Chu straight from negotiations with Occupy SF.
This was reinforced by San Francisco Supervisor David Chu’s comments last night at the celebration for the passage of benefit corporation legislation. He had come directly from a meeting negotiating between the Occupy SF protesters and the City. The issues the protesters were raising, he said, were a result of the large corporations historical lack of regard for the public good. The room full of AB361 supporters, B Corp business leaders, and especially B-Lab founder Jay Coen Gilbert, know that a better corporate structure can change the imbalance.
The legislation creates a new corporate entity called a benefit corporation. A benefit corporation’s purpose may be a general public benefit “defined as a material positive impact on society and the environment, taken as a whole, as assessed against a 3rd-party standard”. A benefit corporation may also declare a specific public benefit such as improving human health or preserving the environment. The 3rd party standard provides for defining, measuring and reporting on corporate social and environmental performance by an independent entity that meets certain criteria.
A key component of this legislation is the requirement that directors consider the impacts of their actions on shareholders, employees, customers, and the environment. It goes even further to protect the public benefit purpose by allowing directors to consider the impacts of the “resources, intent, and conduct of any person seeking to acquire control of the benefit corporation.” In most states, companies can be sued for acting in anything but the best interest of shareholder, which is maximizing profit. This provision stems out of the experiences of early pioneers in social businesses, like Ben and Jerry’s, who saw the companies social benefit commitments disappear after being sold to larger corporations.
A similar bill, SB201, was passed the same day. SB201 creates a Flexible Purpose Corporation, allowing companies to pursue one or more specific public or charitable purposes. It requires the flexible purpose corporation to state its public purpose and to report on progress annually, but does not go to the level of accountability and measurement of the benefit corporation legislation.
While these legislative victories are unlikely to change the ways of large, established and publicly traded companies, it is cause for hope. California is the 6th state to pass benefit corporation legislation. Over 450 companies nationwide are already certified as B Corporations, showing a commitment to this new corporate model.
So, what can we do as individuals? Spend money with local businesses whose taxes support local services. Spend money with B Corps, social ventures and local enterprises committed to growing businesses that address the environmental and social challenges of our time. Consider shifting investments to the growing number of funds and companies working toward economic and social benefit. And support benefit corporation legislation in your state. “2012″, Jay Coen Gilbert declared, “is the year of the benefit corporation.”
Jay Coen Gilbert honors the MVP attorneys who championed AB361
Learn more:
AB361 and other states’ Benefit Corporation legislation
SB201 Flexible Purpose Corporation
