{"id":27073,"date":"2017-10-14T13:25:22","date_gmt":"2017-10-14T18:25:22","guid":{"rendered":"http:\/\/law.marquette.edu\/facultyblog\/?p=27073"},"modified":"2017-10-14T13:25:22","modified_gmt":"2017-10-14T18:25:22","slug":"the-rise-of-benefit-corporations-show-me-the-moneyand-the-good","status":"publish","type":"post","link":"https:\/\/law.marquette.edu\/facultyblog\/2017\/10\/the-rise-of-benefit-corporations-show-me-the-moneyand-the-good\/","title":{"rendered":"The Rise of Benefit Corporations: Show me the Money\u2026and the Good"},"content":{"rendered":"

\"A<\/a>The \u201cBenefit Corporation\u201d is a new corporation class and it may be coming to a state near you (if it hasn\u2019t already). \u00a0A benefit corporation (colloquially referred to as B-corp) is an entity type that seeks to blend profit and purpose.<\/p>\n

In 2010, Maryland was the first state to adopt a benefit corporation law.\u00a0 Since then, about 30 other states have followed suit. As of October 2017, the Wisconsin legislature had a bill under consideration to create a benefit corporation statute.<\/p>\n

What Exactly Is a Benefit Corporation?<\/strong><\/p>\n

Benefit corporations seek to create a material positive impact on society and the environment. These companies focus beyond the entrenched corporate purpose of profit maximization. \u00a0Most states with benefit corporation statutes base these laws on the Model Benefits Corporation Legislation<\/a>.\u00a0 Benefit corporations are required to (a) espouse a general\/specific public benefit, (b) be accountable, and (c) be transparent.<\/p>\n

This pursuit of public benefit could take various forms, such as: providing low-income communities with beneficial services; preserving the environment; improving human health; promoting the arts; or any other nonpecuniary purpose that could be of benefit to society or the environment.<\/p>\n

For example, Better World Books, a benefit corporation, is an online book retailer that sells used and new books.\u00a0 For every book sold, it gives a percentage of its funds and unsold books to literacy foundations across the globe.\u00a0 Some other famous companies who have decided to go the benefit corporation route include Kickstarter, Etsy, and Ben and Jerry\u2019s.<\/p>\n

Benefit corporations are usually required to have some measure of accountability. This often entails measuring the provision of the corporation\u2019s stated public benefit goal against an independent third-party standard.<\/p>\n

Most benefit corporation statutes also require specific disclosures. Corporations are required to provide an annual benefit report to their shareholders regarding the corporation\u2019s success or failures in delivering the espoused public benefit.\u00a0<\/p>\n

How Does It Differ from a Typical Corporation?<\/strong><\/p>\n

Under traditional corporate law precepts, for-profit corporations have one legitimate purpose\u2014maximizing shareholder value. \u00a0Consequently, directors weigh corporate decision through the prism of profitability. It starts and ends with the financial bottom line. \u00a0And anything to the contrary amounts to corporate heresy, punishable by shareholder derivative lawsuits and personal liability. \u00a0This could make it difficult for social entrepreneurs and companies who wanted to create business models that explicitly prioritized non-financial gain.<\/p>\n

But directors of benefit corporations can go further.\u00a0 They can vehemently pursue nonfinancial goals and consider the impact of corporate decisions on society and environment with some added legal protection.<\/p>\n

Now, one may ask\u2014how are b corporations different from corporate social responsibility programs?\u00a0 Well, benefit corporations are intentional about creating a material positive impact on society and environment.\u00a0 A positive result isn\u2019t merely incidental or accidental for these organizations. It provides a bedrock on which companies can embrace a \u201ctriple-bottom-line\u201d approach of people, planet, and profit.\u00a0 The framework of benefit corporations allows for-profit businesses to do more than just pay lip service to espoused social and environmental values.<\/p>\n

\u00a0So Now What?<\/strong><\/p>\n

The rise of social entrepreneurs is a trend worth paying attention to.\u00a0 No doubt, uncertainties abound.\u00a0 How would traditional concepts of corporate law be applied to benefit corporations?\u00a0 How does the business judgment rule apply to board decisions that don\u2019t drive short-term financial gains?\u00a0 What form would shareholder derivative suites take?\u00a0 How are some of these lofty ideals going to be accurately measured and communicated in compliance with requisite statutes? Etc.<\/p>\n

The bevy of questions won\u2019t stop social entrepreneurs, investors, and some traditional corporations from forging ahead. Lawyers must be equipped to not only assist clients with these niche complexities, but they must also be aware of the impact such decisions may have on the client\u2019s bottom line. This is where the client\u2019s business model becomes very important.<\/p>\n

Now benefit corporations don\u2019t always have to forgo profit in pursuit of their public purpose.\u00a0 Some business models allow for a for a positive correlation between profit and purpose\u2014the more good done, the more monies made.\u00a0 This is known as the profit-purpose alignment model of social enterprise.<\/p>\n

On the other hand, some social enterprises may have a negative correlation between profit and purpose. In order words\u2014the more good done, the fewer profits made. This is known as the Profit-Purpose Tension business model of social enterprise.\u00a0 For companies pursuing this type of model, being a benefit corporation becomes even more crucial to the protection of the company\u2019s public benefit purpose.<\/p>\n

Business lawyers advising or intending to counsel social enterprises must remain nimble and dynamic.\u00a0 From understanding the nuances of benefits corporation statutes to the interplay between social enterprise business models, clients seeking to blend purpose and profit are bound to demand more guidance from their legal counsel.<\/p>\n","protected":false},"excerpt":{"rendered":"

The \u201cBenefit Corporation\u201d is a new corporation class and it may be coming to a state near you (if it hasn\u2019t already). \u00a0A benefit corporation (colloquially referred to as B-corp) is an entity type that seeks to blend profit and purpose. In 2010, Maryland was the first state to adopt a benefit corporation law.\u00a0 Since […]<\/p>\n","protected":false},"author":228,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ocean_post_layout":"","ocean_both_sidebars_style":"","ocean_both_sidebars_content_width":0,"ocean_both_sidebars_sidebars_width":0,"ocean_sidebar":"","ocean_second_sidebar":"","ocean_disable_margins":"enable","ocean_add_body_class":"","ocean_shortcode_before_top_bar":"","ocean_shortcode_after_top_bar":"","ocean_shortcode_before_header":"","ocean_shortcode_after_header":"","ocean_has_shortcode":"","ocean_shortcode_after_title":"","ocean_shortcode_before_footer_widgets":"","ocean_shortcode_after_footer_widgets":"","ocean_shortcode_before_footer_bottom":"","ocean_shortcode_after_footer_bottom":"","ocean_display_top_bar":"default","ocean_display_header":"default","ocean_header_style":"","ocean_center_header_left_menu":"","ocean_custom_header_template":"","ocean_custom_logo":0,"ocean_custom_retina_logo":0,"ocean_custom_logo_max_width":0,"ocean_custom_logo_tablet_max_width":0,"ocean_custom_logo_mobile_max_width":0,"ocean_custom_logo_max_height":0,"ocean_custom_logo_tablet_max_height":0,"ocean_custom_logo_mobile_max_height":0,"ocean_header_custom_menu":"","ocean_menu_typo_font_family":"","ocean_menu_typo_font_subset":"","ocean_menu_typo_font_size":0,"ocean_menu_typo_font_size_tablet":0,"ocean_menu_typo_font_size_mobile":0,"ocean_menu_typo_font_size_unit":"px","ocean_menu_typo_font_weight":"","ocean_menu_typo_font_weight_tablet":"","ocean_menu_typo_font_weight_mobile":"","ocean_menu_typo_transform":"","ocean_menu_typo_transform_tablet":"","ocean_menu_typo_transform_mobile":"","ocean_menu_typo_line_height":0,"ocean_menu_typo_line_height_tablet":0,"ocean_menu_typo_line_height_mobile":0,"ocean_menu_typo_line_height_unit":"","ocean_menu_typo_spacing":0,"ocean_menu_typo_spacing_tablet":0,"ocean_menu_typo_spacing_mobile":0,"ocean_menu_typo_spacing_unit":"","ocean_menu_link_color":"","ocean_menu_link_color_hover":"","ocean_menu_link_color_active":"","ocean_menu_link_background":"","ocean_menu_link_hover_background":"","ocean_menu_link_active_background":"","ocean_menu_social_links_bg":"","ocean_menu_social_hover_links_bg":"","ocean_menu_social_links_color":"","ocean_menu_social_hover_links_color":"","ocean_disable_title":"default","ocean_disable_heading":"default","ocean_post_title":"","ocean_post_subheading":"","ocean_post_title_style":"","ocean_post_title_background_color":"","ocean_post_title_background":0,"ocean_post_title_bg_image_position":"","ocean_post_title_bg_image_attachment":"","ocean_post_title_bg_image_repeat":"","ocean_post_title_bg_image_size":"","ocean_post_title_height":0,"ocean_post_title_bg_overlay":0.5,"ocean_post_title_bg_overlay_color":"","ocean_disable_breadcrumbs":"default","ocean_breadcrumbs_color":"","ocean_breadcrumbs_separator_color":"","ocean_breadcrumbs_links_color":"","ocean_breadcrumbs_links_hover_color":"","ocean_display_footer_widgets":"default","ocean_display_footer_bottom":"default","ocean_custom_footer_template":"","ocean_post_oembed":"","ocean_post_self_hosted_media":"","ocean_post_video_embed":"","ocean_link_format":"","ocean_link_format_target":"self","ocean_quote_format":"","ocean_quote_format_link":"post","ocean_gallery_link_images":"on","ocean_gallery_id":[],"footnotes":""},"categories":[70,41,122,3],"tags":[],"class_list":["post-27073","post","type-post","status-publish","format-standard","hentry","category-business-regulation","category-business-transactional-law-and-practice","category-public","category-wisconsin","entry"],"_links":{"self":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/27073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/users\/228"}],"replies":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/comments?post=27073"}],"version-history":[{"count":0,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/27073\/revisions"}],"wp:attachment":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/media?parent=27073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/categories?post=27073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/tags?post=27073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}