Corporations acting for the benefit of constituencies in addition to shareholders is not a new concept. It has been addressed in other countries for years. Over the last year or so, the discussion has found its way to the US.
Whether you support or oppose the proposition, Steven Davidoff Solomon raises a good question in today’s New York Times: “But how do we make sure that money doesn’t simply benefit some pet project of the C.E.O.?”
After all, what constitutes an improvement to our society and how you sustain prosperity for both business and society is open to interpretation.
However, a public benefit corporation, a.k.a. a “B Corp”, and the related certification process can keep the parties honest.
The certification process requires a B Corp to substantiate that their operations are consistent with their declared public purpose. In order to retain certification, the B Corp must continue to perform in accordance with the certification’s legal and transparency requirements. See .
To date, when I suggest a public company convert to a B Corp to meet the goals of The Business Roundtable’s “Statement on the Purpose of a Corporation”, I am told the right of shareholders to secure appraisal rights is an obstacle.
If the Delaware Senate approves (possibly as soon as today) and Delaware’s Governor Carney approve proposed legislation prepared by the Corporate Council of the Delaware State Bar Association and approved by the Delaware State Bar Association, the appraisal obstacle will be gone.
Moving forward, the combination of carefully drafted constitutional documents and B Corp certification will provide the objective standards to meet the broad goals of The Business Roundtable.