Attending my first finance class as an MBA student, the first question my professor asked was “what is the purpose of a business?” He received many answers, but the correct answer was “to maximize shareholder value.” Now, there may be another way to correctly answer the question: the B-Corp.
In the conventional business world maximizing shareholder value is the sole objective. Providing productive employment for people, creating products and services beneficial to the community, or operating according to sustainable environmental standards may be considered nice, but frosting on the cake – if it’s considered at all. In fact, if the leadership of a corporation conducts business in a way that does not maximize the bottom line, they can be sued by shareholders – and the shareholders will win.
For entrepreneurs who want to embed a higher purpose into their organizational mission a new option is taking shape, the Benefit Corporation. Benefit Corporations have a defined corporate purpose to create a positive impact on society and the environment. They are required to consider the impact of their decisions not only on shareholders but also on workers, the community, and the environment.
Locally, W.S. Badger Company, in Gilsum, is a leading proponent of the B-Corp concept. Recently they hosted an informational session to discuss the Benefit Business Movement with Erik Trojan from B Lab and NH State Senator Molly Kelly, the primary sponsor of new legislation to create a Benefit Corporation option in New Hampshire.
According to Bill Whyte, founder of W.S. Badger, “The Benefit Corporation gives companies like Badger the opportunity to write their social mission into the DNA of the company. It also provides an option that protects directors and officers legally for choosing to support social and environmental causes. This means that if the current family/owners here at Badger were ever out of the picture for any reason, Badger’s mandate of “doing good in the world” would remain intact.”
There are currently two paths available to entrepreneurs who want to embed a social mission into the DNA of their companies: certification as a B-Corp and legal status as a Benefit Corporation.
There’s a critical distinction between having benefit corporation legislation in your state and being certified as a B-Corp. While the details are too complicated to fully describe here, I’d like to highlight a couple points for you to explore:
Become a Certified B-Corporation:
B-Corporations are businesses that have been certified by the non-profit B Lab after taking an assessment outlining all business practices. Certified B-Corporations have met a high standard of overall social and environmental performance, and are assigned a score based on the assessment. B-Corporation certification via B Lab is available to all businesses everywhere in the US and around the world.
Check this out; it’s something you can do now!
B-Corporation information: www.bcorporation.net
Support Benefit Corporation Legislation:
The Benefit Corporation is a legal status administered by the state. A Benefit Corporation is a new class of corporation that voluntarily meets higher standards of corporate purpose, accountability, and transparency. Becoming a Benefit Corporation gives entrepreneurs and investors an additional choice when determining which corporate form is most suitable to achieve their objectives.
Currently, Benefit Corporation as a corporate status is recognized by 18 states and the District of Columbia. Legislation is pending in 14 other states, including New Hampshire. It does not change anything about incorporating business in New Hampshire, including tax status (corporations still can elect to be taxed as S or C corporations), it adds an option to the selection of legal status.
Learn more about Benefit Corporation legislation!
Contact NH State Senator Molly Kelly (D-Keene; District 10): www.gencourt.state.nh.us/Senate/members/webpages/district10.aspx
Benefit Corporation information center: www.benefitcorp.net
As we continue to learn more about how socially responsible business practices build long-term economic viability and community strength, the B-Corp and Benefit Corporation may emerge as powerful tools.