A corporation that is not all about profits?
If you happened to open the New York Times on Thanksgiving Day of 2012, you probably could not help but notice the rather shocking full page ad the company Patagonia ran showing a popular jacket beneath the banner–“DON’T BUY THIS JACKET.” Was this clever merchandising or were they just crazy? Actually it was neither. It was the company’s attempt to get people consuming less. But is that not the exact opposite of what companies are supposed to do? Business are supposed to sell more goods and services, and generate more profits, right? Not encourage consumers to consume less?
Under traditional corporate law, corporations are expected to maximize profits and shareholders can sue corporate boards who stray from the path and pursue more altruistic objectives like environmental causes, or other socially conscious objectives. But in Maryland, and in a number of other states that followed its lead, there now is a framework for companies to safely and legally accomplish the goals of the three p’s – people, planet, and profit – it is called a Benefit Corporation.
A Benefit Corporations is created or structured so the Board of Directors is free to consider how their decisions impact society or the environment, not just profits. They still have the fiduciary duty to generate profits, but also have a duty to create a public benefit as well. It is not for every corporation, but the idea is catching on ever since Maryland adopted the concept in 2010. It appears that there are investors that are actively looking to invest in companies that are socially and environmentally conscious.
In order to create a Benefit Corporation, an existing corporation must secure a two-thirds vote of its shareholders and amend its Charter of the Corporation to include a statement that it is a Benefit Corporation, with the purpose of creating a general public benefit. A general public benefit is a “material, positive impact on society and the environment, as measured by a Third-Party Standard, through activities that promote a combination of Specific Public Benefits.” That designation must appear prominently in the Charter and on all stock certificates. A specific public benefit includes preserving the environment, improving human health, promoting the arts and sciences, promoting economic opportunity to disadvantaged individuals or groups, supporting the advancement of knowledge.
There are no particular tax breaks to a Benefit Corporation, nor are filing fees waived or reduced. But any existing corporation, or anyone contemplating establishing a corporate structure who wants to pursue the environment, community, or social causes on the same level as making a profit should consider the Benefit Corporation and consult with a Maryland attorney who is experience in creating business organizations. If it doesn’t work out, the law provides a process for terminating the designation, something else your attorney can explain to you.
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