Benefit corporations – a case study of the US

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Benefit!corporations!–!a!case!study!of!the!
US!and!lessons!for!Australia!
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Prepared!for!B!Lab!Australia!by!the!Social!Impact!Hub!!
October!2014!
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Written!By:!
Claire!Achermann,!Bettina!Forde,!Michael!Ouzas,!UNSW!Law!students!and!interns!at!the!Social!Impact!Hub!
Supervised!by!Sally!Garis!(Associate)!and!Jessica!Roth!(Founder!and!Director),!The!Social!Impact!Hub!
October!2014!
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The!information!contained!in!this!document!does!not!constitute!legal!or!financial!advice!and!should!not!be!
construed!as!such.!!Legal!and!financial!advice!should!be!sought!by!anyone!intending!to!use!any!information!
contained!in!this!document.!
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B!Lab!Report!
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Foreword!
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The!Social!Impact!Hub!brings!together!university!students!and!industry,!nonUprofits,!social!
enterprises!and!foundations!to!develop!and!conduct!a!variety!of!applied!projects!in!the!field!of!social!
impact!under!the!supervision!of!industry!experts.!!The!Social!Impact!Hub!aims!to!develop!the!
pipeline!of!social!change!agents,!whilst!providing!nonUprofits!and!social!businesses!access!to!high!
quality,!industryUstandard!consulting,!policy,!research,!advocacy!and!advisory!services.!!!
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This!report!has!been!written!by!students!at!the!University!of!New!South!Wales!Faculty!of!Law,!
Australia,!as!part!of!completing!an!academic!course!at!the!Social!Impact!Hub.!!The!Social!Impact!Hub!
would!like!to!acknowledge!the!significant!contributions!of!the!university!students!who!conducted!
the!research!and!drafted!this!report,!namely!Claire!Achermann,!Bettina!Forde!and!Michael!Ouzas.!!
Thank!you!to!all!the!people!and!organisations!that!contributed!their!knowledge,!insights!and!
experience!to!the!development!of!this!report.!!In!particular,!we!thank!William!H!Clark,!partner!at!
Drinker!Biddle!&!Reath,!for!sharing!his!perspective!on!the!US!experience!with!us.!!Thanks!also!to!the!
project!partner,!B!Lab!Australia,!and!specifically!MeleUAne!Havea!and!Alicia!Darvall,!whose!insights!
have!enlivened!a!number!of!dimensions!of!this!project.!!!
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This!report!addresses!a!number!of!key!questions!related!to!the!case!for!the!benefit!corporation!legal!
structure!in!Australia:!what!is!benefit!corporation!legislation,!why!does!it!matter,!what!is!the!
situation!in!the!United!States!and!what!could!or!should!happen!in!Australia?!
We!hope!this!report!will!inform!the!discussion!and!be!a!useful!resource!for!B!Lab!Australia!and!the!
broader!business!and!legal!community.!!If!it!is!decided!that!such!a!legal!structure!is!needed!in!
Australia,!it!is!also!hoped!that!this!report!will!assist!in!the!planning!of!the!next!steps!along!the!road!
to!legislative!change.!!
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The!benefit!corporation!is!one!innovative!solution!to!help!meet!the!growing!challenges!facing!
business!and!society!today!and!in!the!future.!!We!look!forward!to!being!part!of!the!next!stage!of!this!
important!journey!to!redefine!success!in!business.!
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Jessica!Roth! !
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Sally!Garis!
Founder!and!Director,!Social!Impact!Hub!
Associate,!The!Social!Impact!Hub!
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B!Lab!Report!
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Table!of!Contents!
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FOREWORD!....................................................................................................................................!2!
TABLE!OF!CONTENTS!......................................................................................................................!3!
EXECUTIVE!SUMMARY!....................................................................................................................!5!
BENEFIT!CORPORATIONS:!USING!THE!POWER!OF!BUSINESS!TO!SOLVE!SOCIAL!AND!ENVIRONMENTAL!PROBLEMS!.......!5!
BENEFIT!CORPORATION!LEGISLATION!IN!THE!US!...........................................................................................!5!
THE!NEED!FOR!BENEFIT!CORPORATION!LEGISLATION!IN!AUSTRALIA!..................................................................!5!
ACHIEVING!LEGISLATIVE!CHANGE:!LESSONS!FOR!AUSTRALIA!............................................................................!6!
BACKGROUND!................................................................................................................................!7!
THE!US!CASE!STUDY!........................................................................................................................!9!
THE!CASE!FOR!BENEFIT!CORPORATION!LEGISLATION!....................................................................!10!
FORCES!LEADING!TO!THE!DEVELOPMENT!OF!THE!BENEFIT!CORPORATION!.........................................................!10!
INADEQUACIES!OF!EXISTING!US!CORPORATIONS!LAW!..................................................................................!10!
MARKET!DEMAND!AND!THE!BUSINESS!CASE!FOR!INCORPORATION!AS!A!BENEFIT!CORPORATION!...........................!12!
CRITICISMS!OF!THE!BENEFIT!CORPORATION!FORM!.......................................................................!16!
EXISTING!LAW!IS!ADEQUATE!....................................................................................................................!16!
VAGUE!DEFINITIONS!OF!PUBLIC!BENEFIT!AND!THIRD!PARTY!STANDARDS!..........................................................!16!
LACK!OF!ACCOUNTABILITY!AND!ENFORCEABILITY!.........................................................................................!17!
KEY!TRENDS!IN!THE!ADOPTION!OF!THE!BENEFIT!CORPORATION!LEGISLATION!..............................!18!
FACTORS!THAT!ENABLED!THE!PASSING!OF!THE!LEGISLATION!..........................................................................!18!
OBSTACLES!TO!THE!PASSING!OF!THE!LEGISLATION!.......................................................................................!19!
ANALYSIS!OF!KEY!STATES!........................................................................................................................!19!
CASE!STUDIES!...............................................................................................................................!22!
CALIFORNIA!..................................................................................................................................!23!
HOW!THE!LEGISLATION!WAS!INTRODUCED!.................................................................................................!23!
IMPACT!OF!THE!LEGISLATION!...................................................................................................................!24!
COMPANY!CASE!STUDY:!PATAGONIA,!CALIFORNIA!......................................................................................!24!
DELAWARE!...................................................................................................................................!26!
COMPANY!CASE!STUDY:!PLUM!ORGANICS,!DELAWARE!................................................................................!27!
MARYLAND!..................................................................................................................................!29!
COMPANY!CASE!STUDY:!THE!BIG!BAD!WOOF,!MARYLAND!...........................................................................!29!
AUSTRALIA!...................................................................................................................................!31!
THE!NEED!FOR!LEGISLATIVE!CHANGE!IN!AUSTRALIA!.....................................................................!32!
DIRECTORS’!DUTIES!...............................................................................................................................!32!
THE!BUSINESS!CASE!...............................................................................................................................!34!
THE!CASE!AGAINST!ENACTING!BENEFIT!CORPORATION!LEGISLATION!...............................................................!36!
B!Lab!Report!
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ACHIEVING!LEGISLATIVE!CHANGE:!LESSONS!FOR!AUSTRALIA!........................................................!38!
‘BRANDING’!THE!LEGISLATION!.................................................................................................................!39!
APPENDICES!.................................................................................................................................!40!
APPENDIX!1!W!TABLE!OF!HYBRID!CORPORATE!FORMS!...................................................................!41!
APPENDIX!2!W!COMPARISON!OF!MODEL!LEGISLATION!AND!INDIVIDUAL!STATE!LEGISLATION!........!44!
APPENDIX!3!W!STATES!WHICH!HAVE!SUCCESSFULLY!ENACTED!LEGISLATION!..................................!46!
REFERENCE!LIST!............................................................................................................................!52!
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B!Lab!Report!
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Executive!Summary!
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Benefit!corporations:!using!the!power!of!business!to!solve!social!and!
environmental!problems!
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Benefit!corporation!legislation!is!a!new!corporate!form!in!a!number!of!US!states.!!The!distinguishing!
feature!of!a!benefit!corporation!is!the!legal!duty!to!create!general!public!benefit!in!addition!to!
financial!return.!!Intentional!creation!of!social!and!economic!benefit!differentiates!the!benefit!
corporation!from!traditional!forUprofit!and!nonUprofit!entities.!!Benefit!corporation!legislation!has!
emerged!against!a!backdrop!of!global!trends!demanding!greater!accountability!and!transparency!
from!business!and!challenging!the!role!business!can!and!should!play!in!society.!!!
Benefit!corporation!legislation!in!the!US!
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As!at!October!2014,!benefit!corporation!legislation!has!been!passed!in!26!US!states!and!Washington!
DC!since!2010.!!Case!studies!on!the!legislation!in!California,!Delaware!and!Maryland!and!specific!
benefit!corporations!in!those!states!demonstrate!the!varying!degrees!that!the!model!benefit!
corporation!legislation!has!been!adopted!as!a!result!of!business!and!political!consensus:!from!the!
highly!flexible!nature!of!Delaware’s!legislation!to!the!unique!Californian!legislation.!
There!were!two!major!forces!that!led!to!the!development!of!the!benefit!corporation:!first,!the!view!
that!existing!US!Corporation!Law!does!not!accommodate!forUprofit,!mission!driven!companies,1!!and!
second,!market!demand!by!consumers,!investors!and!social!entrepreneurs.!!
The!legislation!addresses!the!hesitancy!of!directors!to!take!into!account!the!interests!of!all!
stakeholders,!not!just!shareholders,!when!making!decisions,!for!fear!of!not!fulfilling!their!fiduciary!
duty!of!profit!maximisation!for!shareholders.!It!also!distinguishes!between!an!ethical!(a!truly!‘good’)!
company!and!simply!good!marketing.!
The!need!for!benefit!corporation!legislation!in!Australia!
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B!Lab!–!the!nonUprofit!behind!the!campaign!for!legislative!change!and!the!B!Corp!certification!system!
in!the!US!has!recently!established!a!presence!in!Australia!and!New!Zealand!and!was!officially!
launched!in!September!20142!with!42!founding!certified!B!Corps.!!Taken!within!the!context!of!a!
growing!social!enterprise!sector!and!a!consumer!base!progressively!concerned!with!social!and!
environmental!impact,!the!arrival!of!B!Lab!in!Australia!serves!as!a!timely!inflection!point!for!the!
consideration!of!the!need!for!similar!legislative!change!in!Australia.!!
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!William!H.!Clark,!Jr.!and!Elizabeth!K!Babson,!‘!How!Benefit!Corporations!are!redefining!the!purpose!of!Business!
Corporations’!(2012)!38:2!William(Mitchell(Law(Review!825.!
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!B(Lab(comes(to(Australia,(Small!Giants,!<http://www.smallgiants.com.au/bUlabUcomesUtoUaustralia/>,!13!November!2013.!
B!Lab!Report!
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This!report!finds!that!the!introduction!of!benefit!corporation!legislation!into!Australian!law!would!be!
beneficial!from!the!perspective!of!both!businesses!and!directors.!!Businesses!with!a!social!or!
environmental!purpose!will!be!able!to!enshrine!this!purpose!in!the!‘DNA’!of!the!company,!and!also!
legitimately!distinguish!themselves!from!competitors.!!It!may!help!businesses!attract!investors,!
attract!and!retain!talent,!and!also!protect!their!mission!as!the!company!grows,!or!as!new!
management!or!new!investors!are!brought!in.!!!
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The!growth!and!adoption!of!this!new!corporate!form!in!Australia!could!also!help!promote!a!new!set!
of!values!focused!on!corporate!social!responsibility!within!the!business!sector.!!Importantly,!for!
directors,!it!will!provide!them!with!the!comfort!they!require!to!take!public!benefit!and!nonU
shareholder!stakeholder!interests!into!account!without!risking!personal!liability.!!
Achieving!legislative!change:!lessons!for!Australia!
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A!campaign!for!legislative!change!demands!critical!thinking!and!strategic!action!to!build!support!in!
government,!legal!and!business!communities.!
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Obstacles!and!enhancers!in!the!enactment!of!the!legislation!in!the!US!provide!lessons!for!Australia.!!
First,!the!political!context!and!choice!of!legislators!in!the!US!played!a!crucial!role!in!ensuring!that!the!
legislation!was!passed.!!Australia!needs!to!ensure!that!politicians!who!have!a!strong!legal!
background,!relationships!with!business!and!gravitas!are!chosen!to!promote!the!case!for!benefit!
corporations.!!It!is!also!important!to!consider!the!timing!of!the!political!cycle!and!work!with!key!
government!departments!to!add!legitimacy!to!the!case!for!benefit!corporations.!!!
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Secondly,!the!Bar!Association!in!many!US!states!opposed!the!legislation!on!the!basis!that!any!
additional!obligations!imposed!on!directors!may!encroach!on!their!flexibility.!!Such!resistance!is!
evidence!of!the!need!to!gain!the!support!of!key!legal!bodies!including!the!Australian!Bar!Association!
and!the!Law!Council!of!Australia!and!to!educate!law!firms!and!corporate!lawyers.!!!
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Thirdly,!a!key!enhancer!of!the!US!legislative!process!was!support!from!the!business!community!in!
encouraging!legislation!and!increasing!its!profile.!!The!community!of!B!Corps!in!the!US!was!central!in!
building!support!for!the!legislation!and!will!likely!also!play!a!key!role!in!increasing!public!awareness!
of!benefit!corporations!in!Australia.!!!
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B!Lab!Report!
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Background!
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The!benefit!corporation!is!a!new!corporate!form!that!enables!forUprofit!businesses!to!consider!social!
and!environmental!impact!in!addition!to!financial!performance.!The!global!movement!to!implement!
benefit!corporation!legislation!has!been!largely!driven!by!B!Lab,!a!US!based!nonUprofit!organisation.!!
B!Lab’s!mission!is!to!‘solve!social!and!environmental!problems’!through!‘the!power!of!business.’3!!!
B!Lab!drives!systemic!change!through!three!initiatives:!!
1) Certified!B!Corporations!(B!Corps):!a!corporate!certification!for!sustainable!businesses!and!
social!enterprises!that!meet!higher!standards!of!social!and!environmental!performance!and!
legal!accountability;!!
2) B!Analytics:!a!ratings!platform!that!drives!capital!to!impact!investments!by!assessing!the!
social!and!environmental!performance!of!companies!and!funds;!and!!
3) Benefit!corporations:!a!new!corporate!form!that!changes!corporate!fiduciary!duty,!
permitting!companies!to!create!shareholder!value!and!social!value.!
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This!report!focuses!on!the!third!initiative!–!benefit!corporations.!It!is!important!to!differentiate!
between!a!B!Corp!and!a!benefit!corporation!–!a!benefit!corporation!is!a!legal!status!regulated!by!the!
state!whilst!a!Certified!B!Corp!is!a!forUprofit!business!that!has!received!a!certification!conferred!by!B!
Lab!that!recognises!a!company’s!adherence!to!a!minimum!standard!of!creating!public!benefit!over!
the!previous!year!and!voluntarily!meeting!rigorous!standards!of!transparency,!accountability!and!
sustainability.4!!
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B!Lab!was!founded!in!June!2006!by!Jay!Coen!Gilbert,!Bart!Houlahan!(who!both!ran!a!$250!million!
basketball!footwear!and!apparel!company)!and!Andrew!Kassoy!(who!was!a!partner!and!private!
equity!investor!at!MSD!Capital).!!The!founders!identified!that!existing!corporate!law!limited!directors!
from!considering!the!needs!of!nonUfinancial!stakeholders!and!began!imagining!a!corporate!entity!
that!could!‘meet!the!needs!of!entrepreneurs!and!investors!seeking!to!use!business!as!a!force!for!
good’.5!!The!founders!worked!with!William!Clark,!a!partner!at!law!firm!Drinker!Biddle!&!Reath,!to!
draft!the!Model!Benefit!Corporation!Legislation.6!!In!2010,!Maryland!became!the!first!US!State!to!
pass!benefit!corporation!legislation.!!In!just!four!short!years,!the!legislation!has!now!been!
successfully!enacted!in!26!US!States!and!Washington!DC,!with!a!further!14!currently!reviewing!the!
legislation.7!!!
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!The(Non<Profit(Behind(B(Corps,(Certified!B!Corporation,!<http://www.bcorporation.net/whatUareUbUcorps/theUnonUprofitU
behindUbUcorps>.!!
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!Performance(Requirements,!Certified!B!Corporation!<http://www.bcorporation.net/becomeUaUbUcorp/howUtoUbecomeUaU
bUcorp/performanceUrequirements>.!
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!The(B(Corp(Declaration,!Certified!B!Corporation,!<!http://www.bcorporation.net/whatUareUbUcorps/theUbUcorpU
declaration>.!
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!Kyle!Westaway!&!Dirk!Sampselle,!‘The!Benefit!Corporation:!An!Economic!Analysis!with!Recommendations!to!Courts,!
Boards,!and!Legislatures’!(2013)!62:999!Emory(Law(Journal.!
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!Legislation,!Certified!B!Corporation,!<http://www.bcorporation.net/whatUareUbUcorps/legislation>.!
B!Lab!Report!
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As!a!2014!Skoll!Award!recipient,!B!Lab!has!been!recognised!with!a!$1.25!million!grant!for!its!efforts!
in!‘challenging!the!status!quo!by!building!a!new!sector,!legal!structure,!and!standards;!empowering!a!
community!of!certified!B!Corps;!and!advancing!public!policies!that!enable!companies!to!create!
financial,!social!and!environmental!value!for!both!its!shareholders!and!for!society.’8!!In!addition!to!
25!US!States!having!passed!benefit!corporation!legislation,!over!1,000!B!Corps!have!now!been!
certified!and!over!16,000!companies!use!its!tools.9!!B!Lab!is!now!focussed!on!accelerating!the!global!
adoption!of!this!model!to!redefine!success!in!business.!!This!has!seen!the!establishment!of!B!Lab!in!
34!countries!as!at!June!2014,!including!South!America,!Canada,!Europe!and!Australia!&!New!
Zealand.!!B!Lab!Australia!was!founded!in!2012!and!as!of!August!2014,!42!companies!have!been!
certified!as!B!Corps!in!Australia.!!This!report!is!focused!on!the!legal!aspects!of!benefit!corporations!
and!specifically!how!similar!legislation!to!the!benefit!corporation!legislation!enacted!in!certain!states!
of!the!US!may!be!implemented!in!Australia.!!
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The!benefit!corporation!differs!from!other!forms!of!hybrid!companies.!It!is!more!rigid!than!a!LowU
Profit!Limited!Liability!Company!(L3C)!and!is!subject!to!greater!review.!!California!offers!another!
alternative,!the!Flexible!Purpose!Corporation,!through!its!Corporate(Flexibility(Act(2011(which!allows!
corporations!to!function!as!a!normal!business!with!an!added!‘special!purpose.’10!!In!contrast!to!
benefit!corporations,!flexible!purpose!corporations!are!not!required!to!assess!or!report!against!a!
third!party!standard!and!need!not!pursue!a!general!public!interest!purpose.!!The!benefit!corporation!
also!differs!from!the!UK’s!Community!Interest!Company!(CIC)!in!that!it!is!‘subject!to!no!government!
regulation!of!its!purposes!or!activities.’11!!Further!detail!on!these!other!hybrid!forms!can!be!found!in!
Appendix!1.!!
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!Announcing(the(2014(Skoll(Awardees,!Skoll!Foundation,!<http://www.skollfoundation.org/skollU
entrepreneurs/announcingUtheU2014UskollUawardees>.!Each!year,!the!Skoll!Foundation!awards!“transformative!leaders!
who!are!disrupting!the!status!quo,!driving!large!scale!change…!Each!awardee!received!a!$1.25!million!three!year!core!
support!investment!to!scale!their!work!and!increase!their!impact.”!
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!Certified!B!Corporation,!http://www.bcorporation.net!
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!Katherine!Lofft!et!al,!‘Are!Hybrids!Really!More!Efficient?!A!DriveUby!Analysis!of!Alternative!Company!Structures’!(2011)!
Business(Law(Today.!!
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!The(B(Corp(Declaration,!Certified!B!Corporation,!<!http://www.bcorporation.net/whatUareUbUcorps/theUbUcorpU
declaration>.!
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The!case!for!benefit!corporation!legislation!!
Forces!leading!to!the!development!of!the!benefit!corporation!!
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Consideration!of!the!forces!that!led!to!the!development!of!benefit!corporation!legislation!provide!
context!for!the!case!for!implementation!of!this!new!legal!form.!!Broadly!speaking,!there!are!two!
major!forces!that!led!to!its!development:!
1. Existing!US!Corporation!Law!does!not!accommodate!forUprofit,!mission!driven!companies;12!
and!!
2. Market!demand!by!consumers,!investors!and!social!entrepreneurs.13!
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Prior!to!the!existence!of!benefit!corporation!legislation,!the!scope!for!business!to!consider!public!
benefit!was!limited!by!the!legal!obligations!for!directors!to!act!solely!in!the!best!interest!of!
shareholders.14!!In!the!wake!of!the!global!financial!crisis,!a!sluggish!global!economy!and!reports!of!
corporate!greed!and!corruption,!concerns!have!been!raised!about!the!activity!and!ethics!of!the!
modern!corporation!with!its!singular!focus!on!profit!maximisation.15!!In!addition,!or!perhaps!in!
response,!a!growing!number!of!organisations!are!operating!their!core!business!with!a!focus!on!
generating!public!benefit!as!well!as!financial!return.!!This!has!seen!a!rapid!rise!in!the!supply!and!
consumer!demand!for!corporations!to!take!greater!responsibility!for!their!social!and!environmental!
impacts.!!Both!of!these!forces!are!examined!in!more!detail!below.!After!being!principally!driven!by!
consumer!and!investor!demand,!benefit!corporation!legislation!has!now!attracted!broad!support!
from!entrepreneurs,!investors,!legal!experts,!citizens!and!policy!makers.!!
Inadequacies!of!existing!US!corporations!law!
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The!legislation!addresses!two!main!problems!in!the!US!corporations!law!sphere:!
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1. The!hesitancy!of!directors!to!take!into!account!the!interests!of!all!stakeholders,!not!just!
shareholders,!when!making!decisions,!for!fear!of!not!fulfilling!their!fiduciary!duty!of!profit!
maximisation!for!shareholders;!and!
2. The!lack!of!distinction!between!an!ethical!(a!truly!‘good’)!company!and!good!marketing.16!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
12
!William!H.!Clark,!Jr.!and!Elizabeth!K!Babson,!‘How!Benefit!Corporations!are!redefining!the!purpose!of!Business!
13
14
!Firms(with(benefits:(B(Corporations(and(the(future(of(business,!The!Conversation,!<http://theconversation.com/firmsU
withUbenefitsUbUcorporationsUandUtheUfutureUofUbusinessU13395>.!
15
!Firms(with(benefits:(B(Corporations(and(the(future(of(business,!The!Conversation,!<http://theconversation.com/firmsU
withUbenefitsUbUcorporationsUandUtheUfutureUofUbusinessU13395>.!
16
!Kyle!Westaway,!Dirk!Sampselle,!‘The!Benefit!Corporation:!An!Economic!Analysis!with!Recommendations!to!Courts,!
B!Lab!Report!
10!
!
!
These!problems!are!directly!addressed!by!the!US!benefit!corporation!model!legislation,!which!states!
that:!
!
1. Directors!must!consider!the!interests!of!nonUfinancial!stakeholders!in!addition!to!
shareholders!when!making!decisions;17!
2. Businesses!must!choose!at!least!one!public!benefit!purpose!and!strive!to!achieve!a!material!
positive!impact!on!the!society!and!the!environment;18!and!
3. The!impact!of!companies!in!these!areas!is!to!be!assessed!annually!against!a!third!party!
standard.!
!
An!additional!rationale!for!the!enactment!of!benefit!corporation!legislation!in!the!US!is!the!absence!
of!a!legal!structure!that!enables!the!many!‘ethical’!businesses!that!exist!to!realise!their!potential!to!
impact!society!in!a!positive!manner.!Despite!over!50,000!corporations!identifying!a!desire!to!create!a!
social!or!environmental!benefit,!they!are!unable!to!realise!this!aspiration!due!to!the!dominance!of!
profit!maximisation!and!shareholder!primacy.19!!This!limits!the!ability!of!directors!and!companies!to!
be!socially!focused!unless!they!operate!as!a!notUforUprofit!or!charity,!which!hinders!their!ability!to!
attract!capital.!!This!is!an!unappealing!alternative!for!the!majority!of!those!organisations!looking!to!
benefit!society!and!create!profit!simultaneously.!!The!legislation!has!substantially!redefined!
directors’!fiduciary!duties!by!requiring!social!goals!to!be!linked!to!fiduciary!responsibility.!As!a!result,!
it!is!expected!that!directors!and!officers!of!benefit!corporations!will!be!less!concerned!about!
potential!liability!for!breaching!their!duties!by!pursuing!the!dual!mission!and!will!therefore!be!more!
likely!to!take!social!risks.20!
!
The!benefit!corporation!legislation!creates!a!bridge!between!the!notUforUprofit!and!the!forUprofit!
sectors!of!the!business!world!and!in!doing!so!opens!the!door!for!‘good’!companies!to!benefit!society!
through!their!vast!resources!without!sacrificing!their!ability!to!maintain!or!even!maximise!their!
financial!interests.!This!new!corporate!entity!is!an!innovation!that!aims!to!address!the!limitations!
and!inflexibility!of!corporations!law!by!permitting!directors!to!take!into!account!all!stakeholders,!not!
just!shareholders.!It!also!provides!the!public!with!more!transparent!knowledge!of!truly!‘ethical’!
companies!by!distinguishing!benefit!corporations!from!those!traditional!corporations!that!are!solely!
financiallyUmotivated.21!!The!increasingly!prominent!profile!of!entrepreneurs!pursuing!dual!purposes!
is!likely!to!create!demand!for!benefit!corporation!status!by!providing!a!legal!entity!that!it!seems!will!
be!increasingly!used!to!operate!socially!focused!organisations.22!!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
17
18
!‘Specifics!on!Delaware!Benefit!Corporation!Legislation’!(2013)!Benefit!Corp!Information!Center!
<www.benefitcorp.org/.../Delaware_Public_Benefit_Legislation_Specifics>.!!
19
!Brakman!Reiser,!D.!‘Benefit!Corporations!–!A!Sustainable!Form!of!Organization?’((2012)!46!Wake(Forest(Law(Review!6.!
20
!Katherine!Lofft,!Purvi!Maniar,!Tamar!Rosenberg,!‘Are!Hybrids!Really!More!Efficient?’!(2012)!Business(Law(today.!
21
!William!H!Clarke!Jr!&!Elizabeth!K!Babson,!‘How!Benefit!Corporations!are!Redefining!the!Purpose!of!Business!
Corporations’!(2012)!38:2!William(Mitchell(Law(Review.!
22
!Kyle!Westaway,!Dirk!Sampselle,!‘The!Benefit!Corporation:!An!Economic!Analysis!with!Recommendations!to!Courts,!
B!Lab!Report!
11!
!
!
It!is!important!to!note!that!the!legal!requirement!only!creates!additional!rights!for!shareholders!to!
hold!directors!and!officers!accountable!to!consider!the!interests!of!all!stakeholders.!!It!does!not!
increase!liability,!as!these!expanded!rights!are!limited!to!shareholders!exclusively.!!Anecdotal!
evidence!from!the!US!indicates!that!this!legislative!change!has!not!affected!premiums!for!directors!
and!officers!insurance.23!!If!anything,!the!insurers!believe!their!risk!has!decreased,!as!it!removes!the!
ambiguities!that!exist!in!the!directors’!duties!in!a!traditional!company.!
Market!demand!and!the!business!case!for!incorporation!as!a!benefit!
corporation!
Accelerating!consumer!and!investor!demand!has!led!to!the!formation!of!a!substantial!marketplace!
for!companies!that!are!using!the!power!of!business!to!solve!social!and!environmental!problems.!!A!
growing!number!of!consumers!align!their!purchases!with!their!values.!!Approximately!68!million!US!
consumers!have!a!preference!for!making!purchasing!decisions!based!upon!their!sense!of!social!and!
environmental!responsibility.24!!Further!studies!show!that!49%!of!Americans!have!boycotted!
companies!whose!behaviour!is!perceived!not!to!be!in!the!best!interests!of!society.25!!Also,!78%!of!
buyers!of!consumer!products!and!services!such!as!telecommunications!and!banking!indicated!they!
would!switch!to!a!brand!that!is!socially!responsible!assuming!equal!price!and!quality.26!!There!are!
further!statistics!in!the!table!below.!
This!clear!preference!for!supporting!'good!companies'!extends!to!the!choice!of!employment!U!69%!of!
employees!consider!the!social!and!environmental!track!record!of!the!company!in!deciding!where!to!
work.27!!Masters!in!Business!Administration!graduates!especially!(an!overwhelming!88%)!have!
indicated!a!willingness!to!accept!lower!pay!to!work!for!a!company!that!has!ethical!business!
practices.28!!
In!relation!to!investment,!the!social!responsible!investing!(‘SRI’)!movement!has!grown!over!the!past!
thirty!years!to!almost!ten!percent!of!US!assets!under!management!(roughly!$2.3!billion).29!!SRI!
investors!avoid!unethical!companies!(e.g.!tobacco,!alcohol!and!gaming!stocks)!and!reward!socially!or!
environmentally!responsible!companies!in!each!industry!sector.!!Some!influence!behaviours!of!
corporations!through!shareholder!resolutions!or!other!forms!of!activism.!!Others,!known!as!impact!
investors,!seek!to!create!more!direct!social!or!environmental!impact!through!targeted!direct!equity!
and!debt!investments!in!properties!or!businesses!such!as!community!banks,!micro!finance!
institutions!or!social!venture!funds!investing!globally!across!developed!and!emerging!markets.30!!A!JP!
Morgan!report!in!November!2010!estimated!the!size!of!this!market!opportunity!in!emerging!markets!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
23!
Phone!interview!with!William!H.!Clark,!Jr!–!partner!at!Drinker!Biddle!&!Reath!LLP,!Philadelphia,!Pennsylvania.!
25
!Ibid.!
26
!Ibid.!
27
!Ibid.!
28
!Ibid.!
29
!Ibid.!
30
!Ibid.!
24
B!Lab!Report!
12!
!
!
in!five!sectors!(housing,!rural!water!delivery,!maternal!health,!primary!education!and!financial!
services)!to!be!between!$400!billion!and!$1!trillion.31!!Additionally,!demand!for!impact!investments!
among!US!high!net!worth!individuals!is!estimated!at!$120!billion.32!!
There!is!also!strong!market!demand!from!social!entrepreneurs.!Although!there!is!no!reliable!data!on!
'social!enterprise'!company!revenues,!an!aggregation!of!businesses!belonging!to!membership!
associations!generally!identified!with!the!sustainable!business!movement!reveals!a!marketplace!of!
over!30,000!social!entrepreneurs!with!over!$40!billion!in!revenues!in!the!US.33!!!
The!benefit!corporation!legal!structure!encourages!businesses!to!examine!their!supply!chains!and!
employment!policies,!and!perhaps!encourages!companies!to!employ!members!of!the!local!
community!and!use!local!suppliers,!even!if!this!choice!is!more!costly.34!!It!is!expected!that!any!
reciprocal!increase!in!costs!to!consumers!will!not!dampen!demand,!but!have!a!positive!impact!due!
to!the!increasing!importance!of!social!and!environmental!sustainability!in!consumer!choice.35!!!
!
Recent!research!demonstrates!that!American!consumers!are!concerned!about!the!impact!that!
companies!are!having!on!society!and!are!therefore!demanding!more!socially!responsible!and!
accountable!organisations.36!!The!characteristics!of!benefit!corporations!offer!a!formal!way!for!
consumers!to!evaluate!a!company’s!impact!and!choose!corporations!that!are!committed!to!
sustainability!as!well!as!being!able!to!easily!differentiate!between!ethical!companies!and!those!who!
are!claiming!superficial!social!benefits!or!‘greenUwashing’.37!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
31
!Ibid.!!
!Ibid.!!
33
!Ibid.!!
34
!Ibid.!
35
!Ibid.!
36
!Ibid,!597.!!
37
!Greenwashing!is!defined!as!a!an!attempt!to!appear!environmentally!responsible!through!misleading!or!fraudulent!
marketing!which!makes!a!company!appear!to!be!more!environmentally!responsible!than!they!actually!are.!This!practice!
can!involve!misleading!words!or!graphics,!vagueness!in!claims,!exaggeration!and!omission!of!helpful!information.!Diana!
Ross!&!D!William!Deck!Jnr,!Student(Guide(to(Greenwashing!(2011)!
<http://www.westga.edu/~bquest/2011/greenwashing11.pdf>.!!
32
B!Lab!Report!
13!
!
!
The!business!case!for!becoming!a!benefit!corporation!can!be!summarised!as!follows:!
!
Rationale!
Benefit!
Legal!structure!
• This!could!lead!to!a!competitive!advantage!in!the!marketplace.!!
• Some!of!the!evidence!that!supports!this!assertion!includes:!
differentiates!from!
o Over!90%!of!Americans!believe!corporations!need!to!be!
pretenders!(many!of!
concerned!with!more!than!just!the!bottom!line!and!
whom!may!be!
should!consider!social!and!environmental!issues38!
competitors)!!
o 31%!believe!businesses!should!change!the!way!they!
operate!to!align!with!greater!social!and!environmental!
needs39!
o 82%!of!US!consumers!report!that!whether!and!to!what!
extent!a!company!supports!an!issue!influences!where!
they!shop!and!what!they!buy40!
o 89%!of!US!consumers!are!likely!to!switch!brands!to!one!
that!is!associated!with!a!good!cause,!given!similar!price!
and!quality41!
o Only!16%!believe!companies!can!make!significant!
progress!towards!social!and!environmental!issues42!
o 25%!of!consumers!believe!they!themselves!can!have!a!
significant!impact!through!their!purchases43!
o 90%!would!stop!buying!a!product!if!they!learned!of!a!
company’s!irresponsible!or!deceptive!business!
practices44!
Attract!investors!
• Increasing!numbers!of!mission!aligned!investors!seeking!to!
invest!in!shared!value!businesses!that!ensure!longUterm!viability!
• Increase!investor!confidence!
• Evidence!of!a!growing!number!of!ethical!and!impact!investors!
seeking!investible!enterprises45!
Attract!and!retain!talent!
• Employees!increasingly!want!purposeful!work,!and!may!be!
more!attracted!to!work!for!a!company!where!the!directors!have!
to!legally!consider!public!benefit!
• According!to!Harvard!Business!Review,!millennials!(making!up!
50%!of!the!global!workforce)!seek!work!that!is!personally!
fulfilling!and!connects!to!a!larger!purpose:!
o A!sense!of!purpose!is!the!key!to!job!satisfaction;!
employees!who!say!they!have!the!opportunity!to!make!
a!direct!social!and!environmental!impact!through!their!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
38
!Cone!Communications,!‘2013!Cone!Communications!Social!Impact!Study’!(2013)!
!Cone!Communications!and!Echo,!‘2013!Cone!Communications/Echo!Global!CSR!Study’!(2013)!
40
!Cone!Communications,!‘2013!Cone!Communications!Social!Impact!Study’!(2013)!
41
!Ibid.!
42
!Cone!Communications!and!Echo,!‘2013!Cone!Communications/Echo!Global!CSR!Study’!(2013)!
43
!Ibid.!
44
!Ibid.!
45
!Attract(Investors,!Certified!B!Corporation,!<http://www.bcorporation.net/becomeUaUbUcorp/whyUbecomeUaUbU
corp/attractUinvestors>!
39
B!Lab!Report!
14!
!
!
•
Protect!mission!
•
job!report!higher!satisfaction!levels!than!those!who!
don’t!by!a!2:1!ratio46!
o Studies!show!that!millennials!are!the!most!socially!
conscious!generation!since!the!1960s47!
o Employees!now!look!for!strong!values!within!the!
company,!in!addition!to!skills!development!and!a!clear!
career!path48!!
Research!shows!there!is!a!strong!correlation!between!employee!
engagement!and!financial!performance:!!
o In!2010,!organisations!with!engagement!levels!of!65%!
or!higher!recorded!total!shareholder!returns!22%!higher!
than!the!stock!market!index,!whilst!companies!with!
engagement!of!45%!or!less!had!a!total!shareholder!
return!that!was!28%!lower!than!the!index49!!
The!legal!structure!protects!the!mission!as!the!company!grows,!
or!as!new!management!or!new!investors!are!brought!in,!or!even!
as!the!ownership!changes.!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
46
!NetImpact,!Talent(Report:(What(Workers(Want(in(2012,(<https://netimpact.org/docs/publicationsU
docs/NetImpact_WhatWorkersWant2012.pdf>!
47
!Jeanne!C.!Meister!and!Karie!Willyerd,!‘Mentoring!Millennials’!May!2010!Harvard!Business!Review.!
48!
Ibid.!!!
49!
Engagement!levels!of!45U65%!indicate!the!workforce!is!indifferent!to!organisational!success!or!failure,!whilst!
engagement!levels!of!over!65%!represent!a!high!performing!culture!!
‘Global!Employee!Satisfaction!Continues!to!Lag!in!2011,!Says!Aon!Hewitt’!(10!November!2011)!
<http://aon.mediaroom.com/index.php?s=25776&item=82897>!
B!Lab!Report!
15!
!
!
Criticisms!of!the!benefit!corporation!form!
!
Existing!law!is!adequate!
!
Opponents!of!the!benefit!corporation!form!argue!that!the!rationale!in!favour!rests!on!the!mistaken!
assumption!that!existing!corporate!law!prevents!directors!from!considering!nonUshareholder!
interests,!thus!raising!questions!about!the!genuine!need!for!the!introduction!of!a!new!legal!entity.!!
Supporters!of!the!existing!law!contend!there!are!no!explicit!legal!restrictions!preventing!directors!
from!considering!the!impact!of!their!corporate!decisionUmaking!on!external!stakeholders!or!society!
at!large.!It!has!been!argued!that!the!primary!rationale!for!the!new!legislation!rests!on!the!
misconception!that!existing!law!compels!companies!to!unwaveringly!maximise!shareholder!return,!
when!in!reality,!corporate!decisions!are!largely!a!function!of!choice!rather!than!law.50!!!
!
Given!the!increasing!demand!for!corporate!social!responsibility!and!accountability,!there!are!many!
companies!already!successfully!operating!using!socially!responsible!practices!under!the!existing!forU
profit!structure.!With!the!growing!number!of!certifications!available!and!the!movement!towards!
greater!transparency!with!the!release!of!‘sustainability’!reports,!it!is!argued!that!the!benefit!
corporation!form!is!not!required.51!!
Vague!definitions!of!public!benefit!and!third!party!standards!
!
Academics!and!some!nonUprofit!industry!groups!and!associations!that!oppose!the!benefit!
corporation!legislation!have!argued!that!the!requirement!for!‘general!public!benefit’!is!poorly!
defined!and!not!sufficiently!clear!to!serve!as!a!measurable,!attainable!goal.52!!
!
Moreover,!the!determination!of!whether!an!organisation’s!activities!actually!provide!a!public!benefit!
is!left!to!an!unregulated!‘thirdUparty!standardUsetter’.!This!has!the!potential!to!create!a!market!of!
organisations!that!certify!the!standards!of!benefit!corporations!including!rating!agencies,!
government!advisory!firms!or!existing!product!certifiers.53!The!role!of!these!potential!groups!is!not!
clear!and!there!is!a!concern!regarding!the!involvement!of!these!third!party!organisations!in!ensuring!
the!provision!of!public!benefit!after!incorporation.54!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
50
!Noam!Noked,!‘Benefit!Corporations!vs!Regular!Corporations:!A!Harmful!Dichotomy’!on!The(Harvard(School(Forum(on(
Corporate(Governance(and(Financial(Regulation!(13!May!2012)(
<https://blogs.law.harvard.edu/corpgov/2012/05/13/benefitUcorporationsUvsUregularUcorporationsUaUharmfulU
dichotomy/>.!!
51
!Justin!Blount!and!Kwabena!OffeiUDanso,!‘The!Benefit!Corporation:!A!Questionable!Solution!to!a!NonUExistent!Problem’!
(2013)!44!St(Mary’s(Law(Journal.!!
52
!Dana!Brakman!Reiser,!‘Benefit!Corporations—A!Sustainable!Form!of!Organization?’!(Research!Paper,!No.!293,!Brooklyn!
Law!School,!September!2012);!Justin!Blount!and!Kwabena!OffeiUDanso,!‘The!Benefit!Corporation:!A!Questionable!Solution!
to!a!NonUExistent!Problem’!(2013)!44!St(Mary’s(Law(Journal.!
53
!Ibid.!!
54
!Ibid.!!
B!Lab!Report!
16!
!
!
Additionally,!the!legislation!has!been!criticised!for!its!vague!third!party!standard!requirements.!The!
legislation!arguably!provides!little!guidance!on!the!content!of!the!standards,!how!they!should!be!
applied,!how!often!and!by!whom,!instead!only!stating!that!they!should!be!independent!and!
transparent.55!The!statutes!provide!no!baseline!to!the!standards!these!third!parties!should!reference!
when!conducting!the!evaluation.56!!!
Lack!of!accountability!and!enforceability!
!
Some!governance!experts!and!associations!are!concerned!that!the!lack!of!clarity!and!enforceability!
of!the!standards!renders!the!new!form!vulnerable!and!directors!may!exploit!the!corporate!form!to!
achieve!their!own!ends.57!!The!benefit!corporation!rests!on!the!premise!that!it!will!fulfil!its!social!
purpose!in!an!effective!manner.!However,!the!model!laws!do!not!appear!to!have!a!mechanism!to!
ensure!legitimacy.58!!
!
In!addition,!there!is!arguably!a!lack!of!accountability!to!shareholders!who!can!only!hold!directors!
responsible!through!their!voting!rights!or!by!initiating!benefit!enforcement!proceedings.59!This!
concern!could!be!addressed!through!additional!regulation!of!internal!governance,!including!
oversight!of!a!company’s!social!goals!by!a!dedicated!benefit!director!and!external!regulation!to!
prevent!abuse!of!the!corporate!form.60!!
!
The!practical!implication!of!involving!other!stakeholders!in!the!model!has!also!been!questioned.!The!
model!legislation!does!not!appear!to!create!any!enforceable!benefit!for!nonUshareholder!
stakeholders,!as!they!do!not!have!any!legal!or!voting!recourse.61!Despite!shareholder!interests!no!
longer!needing!to!take!priority,!this!corporate!form!does!not!encompass!a!true!stakeholderUcentric!
model.62!!
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
55
Law!School,!September!2012);!S!&!M!Alorn,!Benefit(Corporations:(A(New(Formula(for(Social(Change!(June!2012),!The!
Center!for!Association!Leadership,!<https://www.asaecenter.org/Resources/ANowDetail.cfm?ItemNumber=179687>.!!!
56
Law!School,!September!2012)!
57
!S!&!M!Alcorn,!Benefit(Corporations:(A(New(Formula(for(Social(Change!(June!2012),!The!Center!for!Association!Leadership,!
<https://www.asaecenter.org/Resources/ANowDetail.cfm?ItemNumber=179687>.!!!
58
!Joseph!Karl!Grant,!‘When!Making!Money!and!Making!Sustainable!and!Societal!Difference!Collide:!Will!Benefit!
Corporations!Succeed!or!Fail?’!(2013)!46:3!Indiana(Law(Review.!
59
60
!K!&!R!Wilburn,!‘The!Double!Bottom!Line:!Profit!and!Social!Benefit’!(2014)!57!Business(Horizons!16.!
61
62
!Ibid.!!
B!Lab!Report!
17!
!
!
Key!trends!in!the!adoption!of!the!benefit!corporation!
legislation!
!
As!of!October!2014,!26!states!in!the!US!and!the!District!of!Columbia!have!successfully!enacted!
legislation!recognising!the!benefit!corporation,!and!a!further!14!are!currently!reviewing!the!
legislation.63!!The!passing!of!legislation!in!the!US!was!marked!by!both!obstacles!and!enhancers,!
which!posed!both!challenges!to!the!legislation!as!well!as!support!in!its!implementation.!!
Factors!that!enabled!the!passing!of!the!legislation!
!
States!that!have!been!successful!in!passing!the!benefit!corporation!legislation!generally!exhibit!one,!
if!not!many,!of!the!below!trends:!!
• Strong!legislative!support;!
• Support!from!influential!local!business!leaders;!
• Advocacy!from!B!Lab;!
• A!strong!community!of!certified!B!Corps;!
• Collaboration!between!B!Lab!and!key!industry!bodies!such!as!the!American!Sustainable!Business!
Council;!and!
• Strong!civilian!activism!(through!petitions!such!as!Care2).64!!
!
Strong!backing!from!key!legislators!has!been!critical!to!the!successful!passing!of!the!legislation.!!The!
state!of!Maryland!highlights!this!clearly.!!Democrat!Senator!Jamie!Raskin!was!an!ideal!sponsor!of!the!
legislation!that!unanimously!passed!the!Senate,!making!Maryland!the!first!state!to!implement!the!
legislation.!!As!a!Professor!of!Constitutional!Law!at!the!American!University,!Washington!D.C.,!Raskin!
had!both!the!legal!nous!to!appreciate!the!importance!of!the!benefit!corporation!legislation!and!the!
credentials!and!expertise!to!command!the!respect!of!his!peers!on!the!subject.!Furthermore,!his!
genuine!passion!and!commitment!was!significant!given!the!innovative!and!pioneering!nature!of!the!
legislation.!!
!
In!almost!all!states,!strong!support!from!the!business!community!played!a!vital!role!in!raising!the!
profile!of!the!legislation!and!influencing!public!opinion.!!Pioneering!businesses,!including!Patagonia!
and!Plum!Organics!(see!case!studies!in!the!next!section),!championed!the!need!for,!and!the!benefits!
of,!becoming!a!benefit!corporation,!helping!to!popularise!the!legislation.!!Additionally,!the!
prominent!public!profile!of!B!Lab!and!the!growing!certified!B!Corp!community!rallied!further!
momentum!for!change.!!Key!industry!bodies,!such!as!the!American!Sustainable!Business!Council,!
advocated!for!the!legislation!in!several!states.!There!was!often!a!cohesive!effort!between!industry!
bodies,!companies!and!the!B!Corp!community.!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
63
!Legislation,!Certified!B!Corporation,!<http://www.bcorporation.net/whatUareUbUcorps/legislation>.!
!Care2!is!a!social!action!network!focused!on!delivering!content!on!healthy!living!and!enabling!engagement!with!socially!
responsible!issues.!!Boasting!over!16!million!members,!Care2!also!owns!and!operates!www.thepetitionsite.com,!the!
petition!arm!of!the!network.!!In!the!past!12!months,!www.thepetitionsite.com!has!acquired!over!24!million!signatures!on!a!
range!of!issues!including!human!rights!and!animal!welfare.!
64
B!Lab!Report!
18!
!
!
Obstacles!to!the!passing!of!the!legislation!
!
The!Bar!Association,!as!the!central!regulator!of!the!legal!profession!in!the!US,!proved!to!be!a!
significant!barrier!to!the!adoption!of!the!benefit!corporation!legislation.!!William!H!Clark,!who!
drafted!the!model!legislation,!observed!that!as!a!conservative!and!traditional!institution,!the!Bar!
Association!was!resistant!to!the!change!the!benefit!corporation!legislation!represented.65!!The!
Association!was!concerned!about!the!potential!disruption!to!the!legal!and!business!industries.!!In!
particular,!corporate!lawyers,!who!advocated!their!corporate!clients’!interests,!were!apprehensive!
that!the!additional!obligations!posed!on!directors!might!erode!their!flexibility!in!management.!!
Analysis!of!key!states!
!
It!is!helpful!to!examine!the!significant!trends!and!strategies!in!detail!in!relation!to!a!number!of!key!
states.!!The!following!section,!organised!in!chronological!order,!highlights!the!factors!in!each!state!
that!helped!the!successful!passage!of!the!legislation.!!A!complete!table!with!all!states!is!provided!in!
Appendix!3.!
!
MARYLAND!
Maryland!pioneered!the!adoption!of!benefit!corporation!legislation,!becoming!the!first!to!
successfully!pass!legislation!on!14!April!2010.!!The!success!in!large!part!was!due!to!the!efforts!of!
Democrat!Senator!Jamie!Raskin.66!!As!a!Professor!of!Constitutional!Law!at!the!American!University’s!
College!of!Law,!Raskin!appreciated!the!highly!innovative!nature!of!benefit!corporations!and!was!a!
passionate!supporter!of!the!legislation.!!Senator!Raskin’s!commitment!to!benefit!corporations!and!
the!respect!he!commanded!in!the!Senate!saw!the!legislation!pass!unanimously.!!Additionally,!strong!
support!from!key!business!figures,!such!as!Jim!Epstein,!Chairman!of!EFO!Capital!Management67!and!
Brandon!White,!CEO!of!Lateral!Line,!was!vital!in!the!adoption!of!the!legislation!in!Maryland,!
illustrating!two!of!the!key!trends!common!to!states!that!have!passed!benefit!corporation!legislation.!
!
NEW!YORK!
In!New!York,!the!joint!efforts!of!Assembly!Speaker!Sheldon!and!Senator!Squadron,!in!collaboration!
with!the!support!of!organisations!and!business!was!key!to!the!passing!of!benefit!corporation!
legislation!on!12!December!2011,!making!it!the!seventh!state!to!recognise!the!new!corporate!
entity.68!!Organisations!including!the!American!Sustainable!Business!Council,!Local!First!Ithaca!and!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
65
!Phone!interview!with!William!H.!Clark,!Jr!–!a!partner!at!Drinker!Biddle!&!Reath!LLP,!Philadelphia,!Pennsylvania.!!Mr!Clark!
drafted!the!model!benefit!corporation!legislation.!!
66
!B!Lab,!Maryland!First!State!in!Union!to!Pass!Benefit!Corporation!Legislation,!(April!14!2010)!CSR(Wire(
<http://www.csrwire.com/press_releases/29332UMarylandUFirstUStateUinUUnionUtoUPassUBenefitUCorporationULegislation>.!!
67
!EFO!Capital!Management!is!an!investment!management!and!consulting!firm!based!in!Washington!D.C.!EFO!Capital!
Management!is!an!investment!management!and!consulting!firm!based!in!Washington!D.C.!Lateral!Line!is!a!company!
specialising!in!anglers!and!fishing!apparel.!
68
!Neetal!Parekh,!This!Just!In...New!York!Passes!Benefit!Corporation!Legislation!(12!December!2011)!Innov8(Social!!
<http://www.innov8social.com/2011/12/thisUjustUinnewUyorkUpassesUbenefit.html>.!!
B!Lab!Report!
19!
!
!
Singlebrook!Technology!were!among!the!legislation’s!key!supporters!while!Buffalo!First!!actively!
lobbied!Buffalo!Council!Members!for!the!adoption!of!the!benefit!corporation!legislation.!!!!
!
CALIFORNIA!!
The!successful!adoption!of!the!benefit!corporation!legal!form!in!California!demonstrated!all!of!the!
enabling!factors!identified!above.!!The!American!Sustainable!Business!Council,!in!tandem!with!B!Lab,!
was!fundamental!in!gaining!support!for!the!legislation!that!was!passed!on!1!January!2012.69!
Additionally,!the!legislation!was!supported!by!250!local!businesses!and!leading!American!companies!
including!B!Corp!Patagonia,!lending!substantial!weight!to!the!campaign.!!The!petition!website,!
Care2,!mobilised!the!support!of!more!than!3,000!citizens!from!the!general!community!by!
encouraging!individuals!to!lobby!their!government!representatives!for!the!implementation!of!the!
benefit!corporation!legislation.!
!
LOUISIANA!
The!collaboration!between!the!New!Orleans!Business!Alliance!and!B!Lab!was!vital!in!the!success!of!
the!benefit!corporation!legislation!in!Louisiana,!which!was!passed!on!1!August!2012.70!!The!New!
Orleans!Business!Alliance!realised!the!significant!advantages!of!the!corporate!form!for!attracting!
social!enterprises!to!the!state!and!the!compatibility!of!the!values!of!the!benefit!corporation!with!the!
ethos!of!existing!businesses.71!Strong!legislative!support!by!Representative!Leger!and!Representative!
Ortego!saw!the!legislation!pass!unanimously!in!Louisiana.!
!
MASSACHUSETTS!
In!Massachusetts,!the!collective!effort!by!politicians,!lobbying!groups!and!support!from!the!business!
community!were!pivotal!in!the!success!of!benefit!corporation!legislation,!which!was!signed!into!law!
on!7!August!2012.72!!The!bill!was!introduced!by!Senator!Joyce!and!lobbying!groups!assisted!in!
gathering!support!for!the!legislation.!!Additionally,!the!bill!was!heavily!supported!by!several!other!
legislators!and!Governor!Deval!Patrick.!!The!benefit!corporation!also!attracted!support!from!
influential!businesses,!including!Dimagi!Inc73!and!the!Dancing!Bear!Baking!Company.74!!Such!efforts!
were!all!instrumental!in!the!successful!passage!of!the!benefit!corporation!bill.!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
69
!Bart!King,!Louisiana,(South(Carolina(Pass(Benefit(Corporation(Laws,!(June!19!2012)!Sustainable!Brands(
<http://www.sustainablebrands.com/news_and_views/articles/louisianaUsouthUcarolinaUpassUbenefitUcorporationUlaws>.!!
70
!Anne!Field,!Becoming!a!Benefit!Corp.!Is!More!Complex!for!Some!Social!Enterprises!(8!March!2012)!Forbes!
<http://www.forbes.com/sites/annefield/2012/08/03/becomingUaUbenefitUcorpUisUmoreUcomplexUforUsomeUsocialU
enterprises/>.!
71
!Louisiana!Becomes!8th!State!To!Approve!B!Corps,!Shareable!<http://www.shareable.net/blog/louisianaUbecomesU8th!
stateUtoUapproveUbUcorps>.
72
!Sharon!C.!Lincoln!&!Adrienne!M.!Ellman,!Benefit!Corporations!Have!Arrived!in!Massachusetts!(January!11!2013)!Boston(
Bar(Association—Business!Transactions!Newsletter!<http://www.bostonbar.org/sections/businessUtransactions/businessU
transactionsUnewsletter/2013/01/11/benefitUcorporationsUhaveUarrivedUinUmassachusetts>.!
73
!Dimagi!Inc.!is!a!forUprofit!social!enterprise!aimed!at!delivering!technology!to!developing!communities!based!in!Boston,!
MA.!
74
!Dancing!Deer!Baking!Company!is!a!baked!goods!company!based!in!Boston,!MA.!!Dancing!Deer!Baking!Company!became!
a!benefit!corporation!in!December!2012.!
B!Lab!Report!
20!
!
!
A!key!strategy!employed!by!Senator!Joyce!was!to!introduce!the!benefit!corporation!bill!as!part!of!
another!legislative!package!to!hasten!the!legislative!process.!
!
OREGON!
As!the!state!with!the!second!highest!concentration!of!certified!B!Corporations!in!the!United!States,!
the!backing!of!the!local!business!community!was!vital!in!the!implementation!of!benefit!corporation!
legislation!in!Oregon.!!The!state’s!37!certified!B!Corps!were!responsible!for!employing!2,869!people!
and!injecting!over!$309!million!into!the!Oregon!economy.75!!Combined!with!the!support!of!key!
business!figures!such!as!Bill!Campbell,!Equilibrium!Capital!Group,!Eric!FriedenwaldUFishman,!
Metropolitan!Group!and!the!Oregon!Business!Alliance,!the!benefit!corporation!legislation!received!
strong!biUpartisan!support!and!was!signed!into!law!by!Governor!John!Kitzhaber!on!18!June!2013.
(
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
75
!Tony!Green,!Record!Number!of!Oregon!Businesses!Register!as!Benefit!Companies!on!Day!1!of!New!Law!(2!January!2014)!
Oregon(Secretary(of(State(Kate(Brown!<!http://oregonsosblog.us/2014/01/recordUnumberUoregonUbusinessesUregisterU
benefitUcompaniesUdayU1UnewUlaw/>.!
!
B!Lab!Report!
21!
!
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!
Case!studies!
B!Lab!Report!
22!
!
!
California!
The!implementation!of!benefit!corporation!legislation!in!California!
!
How!the!legislation!was!introduced!
!
THE!FIRST!ATTEMPT!
The!driving!force!behind!the!advocacy!of!the!new!legal!form!in!California!was!demand!from!local!
companies!wishing!to!maintain!their!competitive!edge!as!‘a!national!leader!in!the!growing!green!
economy’.76!!There!was!a!lack!of!flexibility!in!the!corporate!legal!structure!to!allow!for!the!pursuit!of!
social!and!environmental!goals!in!addition!to!profit!maximisation.77!!In!2008,!B!Lab,!in!conjunction!
with!law!firm!Hanson!Bridgett!and!the!New!Voice!of!Business,!sought!to!introduce!assembly!bill!
2944!(AB!2944)!into!Californian!law.78!!The!bill!aimed!to!amend!the!California!Corporations!code!in!
relation!to!the!‘fiduciary!duties!applicable!to!corporate!directors!of!all!California!corporations’79.!!!
The!bill!sought!to!create!a!nonUshareholder!constituency!statute!that!included!an!ability!to!consider!
environmental!impacts.80!!AB!2944!received!significant!support!from!business!groups!in!the!state!
including!the!Silicon!Valley!Leadership!Group!and!the!San!Francisco!Chamber!as!well!as!many!
individual!businesses.!!However,!the!Californian!State!Bar!Association!and!the!Chamber!of!
Commerce!opposed!the!bill,!principally!‘because!it!would!have!imposed!a!new!governance!standard!
on!all!California!corporations!without(the(consent(of(the(corporation(or(its(shareholders’.81!!Governor!
Schwarzenegger!vetoed!the!bill,!but!he!acknowledged!the!issues!raised!by!the!bill!and!indicated!
interest!in!a!new!corporate!form.82!!It!was!thought!that!the!legislation!as!it!was!then!proposed!
altered!the!existing!corporate!form!in!a!way!that!created!ambiguity!around!directors’!duties.!!!
!
THE!SUCCESSFUL!BENEFIT!CORPORATION!BILL!
The!benefit!corporation!bill!that!was!ultimately!successful,!AB!361,!was!the!result!of!a!drafting!and!
lobbying!collaboration!between!a!number!of!businesses,!politicians,!lawyers!and!civil!society!groups.!!
The!members!of!the!founding!group!represented!a!variety!of!industries!and!included!RSF!Social!
Finance,!Method,!AlterECO,!New!Resource!Bank,!the!American!Sustainable!Business!Council!and!two!
law!firms,!Wendell!Rosen!Black!&!Dean!and!Hanson!Bridgett.83!!The!American!Business!Council!and!!!
B!Lab!were!also!crucial!in!gaining!support!for!the!bill.!!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
76
!Jared!Huffman,!AB(361(Benefit(Corporations!(10!August!2011)!Innov8social,!
<http://www.innov8social.com/2011/08/factUsheetUforUabU361Ucalifornia.html>.!
77
!Ibid.!
78
!Amy!Westervelt,!A!new!Corporation!for!a!New!Economy,!(2009),!B(Corporation(Annual(Report!13.!
79
!The!Corporations!Committee!of!the!Business!Law!Section!of!the!State!Bar!of!California,!letter!to!Jared!Huffman,!AB!361!
(26!April!2011)!2!<http://www.thecorporatecounsel.net/nonMember/docs/04_26_11_AB361.pdf>.!
80
!Ibid.!
81
!Ibid.!
82
!Ibid.!!
83
!Good(News(for(B(Corporations:(AB(361(passes(In(The(CA(Assembly!,((21!May!2011)!dharma!Merchant!Services!
<http://www.dharmamerchantservices.com/blog/item/goodUnewsUforUbUcorporationsUabU361UpassesUinUtheUcaUassemly>.!!
B!Lab!Report!
23!
!
!
In!addition,!over!250!local!businesses!along!with!leading!American!companies!such!as!Patagonia!
added!substantial!weight!to!the!cause.!!The!petition!website!Care!2!mobilised!the!support!of!more!
than!3,000!citizens!from!the!general!community!by!encouraging!individuals!to!lobby!their!
government!representatives!for!the!implementation!of!the!benefit!corporation!legislation.84!!
!
POLITICAL!SUPPORT!
Democrat!Representative!Jared!Huffman!provided!key!political!support!for!the!new!legislation.!!!
Huffman!was!introduced!to!the!concept!of!benefit!corporations!through!his!annual!‘here!should!be!a!
law…’!contest!where!entrants!pitch!the!case!for!new!laws.85!!Huffman!intuitively!understood!the!gap!
in!Californian!corporate!law,!so!he!commenced!working!with!B!Lab!to!draft!the!legislation.!!The!
legislation!was!modelled!on!other!states!and!as!explained!above,!a!coalition!of!business!associations,!
legal!scholars!and!legislators!were!involved!in!the!process!of!adapting!the!law!to!suit!California.86!!
There!was!some!criticism!from!Republican!Party!members,!who!were!concerned!that!such!a!law!
would!lead!to!the!introduction!of!differential!tax!rates.!!The!California!State!Bar!Association!and!
representatives!from!the!nonUprofit!sector!also!raised!concerns.87!!Despite!this!criticism,!the!
legislation!was!passed!in!October!2011!and!came!into!effect!on!3!January!2012.!!!!
Impact!of!the!legislation!
!
As!the!changes!to!the!legislation!are!relatively!new,!the!actual!impact!on!business!and!society!is!not!
yet!well!understood.!!Impact!can!only!be!discussed!in!terms!of!outputs!and!outcomes!at!this!stage.!!!!
On!the!opening!day!of!registration!twelve!businesses!filed!papers!to!become!benefit!corporations.88!!
These!corporations!included!Patagonia,!Green!Retirement!Plans!and!Thinkshift!Communications.89!!
There!are!now!over!180!benefit!corporations!in!California.90!
Company!case!study:!Patagonia,!California!
!
BACKGROUND!
Founded!in!1973!by!Yvon!Chouinard,!Patagonia!has!evolved!from!a!small!company!that!produced!
tools!for!climbers,!to!manufacturing!highUend!outdoor!sporting!gear!and!apparel!for!men,!women!
and!children.91!!Patagonia!is!a!subsidiary!of!The!Lost!Arrow!Corporation,!based!in!Ventura,!California!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
84
!Sue!Anne!Reed,!‘Patagonia!Registers!as!First!California!Benefit!Corporation!on!The(Care2(Team(Blog,(3!January!2012!
<http://www.care2.com/care2blog/patagoniaUregistersUasUfirstUcaliforniaUbenefitUcorporation.html>.!
85
!Ryan!Honeyman,!B(Corp:(Q&A:(US(Representative(Jared(Huffman!(18!November!2013)!Honeyman!Sustainability!
Consulting!<http://honeymanconsulting.com/2013/11/18/bUcorpUqaUusUrepresentativeUjaredUhuffman/>.!
86
!Jared!Huffman,!AB(361(Benefit(Corporations!(10!August!2011)!Innov8social,!http://www.innov8social.com/2011/08/factU
sheetUforUabU361Ucalifornia.html.!!
87
!Ibid.!
88
!Marc!Lifsher,!California(businesses(seek(new(‘benefit(corporation’(status!(3!January!2012)!Los!Angeles!Times!(
<http://articles.latimes.com/2012/jan/03/news/laUcaliforniaUbusinessesUseekUnewUbenefitUcorporationUstatusU20120103>.!
89
!Sue!Anne!Reed!Patagonia(Registers(as(First(California(Benefit(Corporation!(3!January!2012)!Care2(
<http://www.care2.com/care2blog/patagoniaUregistersUasUfirstUcaliforniaUbenefitUcorporation.html>.!
90
!Benefit!Corp!Information!Center,!Find(a(Benefit(Corp,!<http://benefitcorp.net/findUaUbenefitUcorp/search>.!
91
!Our(Reason(for(Being,!Patagonia!<http://www.patagonia.com/us/patagonia.go?assetid=2047>.!
B!Lab!Report!
24!
!
!
and!sells!its!products!throughout!the!world!both!online!and!in!stores.!!Patagonia!employs!around!
1,350!people,!including!its!newly!appointed!CEO!Rose!Marcario!and!generates!around!USD$600!
million!in!annual!revenue.92!!
!
Patagonia!operates!under!the!premise!that!they!‘build!the!best!product,!cause!no!unnecessary!
harm,![and]!use!business!to!inspire!and!implement!solutions!to!the!environmental!crisis.’93!!This!is!
demonstrated!by!the!commitment!made!by!Chouinard!to!donate!1!per!cent!of!their!total!sales!or!10!
per!cent!of!their!profits!to!environmental!groups.!!They!are!also!involved!with!the!Common!Threads!
Initiative,!Conservation!Alliance!and!Bluesign!Standard!as!part!of!their!environmental!sustainability!
and!conservation!program.94!!Patagonia!ensures!all!their!products!are!produced!in!safe,!fair,!legal!
and!humane!working!conditions!throughout!their!supply!chain.95!!
!
IMPACT!OF!ADOPTING!THE!BENEFIT!CORPORATION!FORM!
After!becoming!a!certified!B!Corp!in!2011,96!Patagonia!became!very!involved!in!the!process!of!
introducing!benefit!corporation!legislation!into!Californian!law.!!When!the!legislation!came!into!
effect!on!3!January!2012,!the!company!was!among!one!of!the!first!to!adopt!the!new!corporate!
form.97!!
!
Chouniard!has!been!consistently!supportive!of!the!legislation!saying!that!it!‘creates!the!legal!
framework!to!enable!missionUdriven!companies!like!Patagonia!to!stay!missionUdriven!through!
succession,!capital!raises!and!even!changes!in!ownership!by!institutionalizing!the!values,!culture,!
processes!and!high!standards!put!in!place!by!founding!entrepreneurs.’98!!By!adopting!this!structure!
Chouniard!believes!that!Patagonia’s!business!model!has!been!enshrined!into!law!and!it!now!has!a!
mechanism!to!protect!the!company’s!core!values!during!succession!as!well!as!create!quantified!
measurement!of!environmental,!social!and!governmental!values.99!!Chouniard!commented!that!this!
is!‘the!start!of!the!revolution!because!the!existing!paradigm!isn’t!working!any!more.!!This!is!the!
future.’100!!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
92
!Clare!O’Connor,(Outdoor(Gear(Titan(Patagonia(Names(Rose(Marcario(CEO(As(Company(Bets(on(Sustainable(Food!(23!
January!2014)!<http://www.forbes.com/sites/clareoconnor/2014/01/23/patagoniaUnamesUfirstUfemaleUceoUasUouterwearU
companyUbetsUonUsustainableUfood/>.!
93
!Our(Reason(for(Being,!Patagonia!<http://www.patagonia.com/us/patagonia.go?assetid=2047>.!
94
!Environmental(and(Social(Responsibility,!Patagonia!<http://www.patagonia.com/us/environmentalism>.!
95
!Corporate(Responsibility,!Patagonia,!<http://www.patagonia.com/us/patagonia.go?assetid=67372>.!
96
!They’re(a(B(Corp(2012!(January!2012),!Certified!B!Corporation,!<https://www.bcorporation.net/newsUandUmedia/annualU
reportU2012/theyreUaUbUcorpU2012>.!
97
!John!Tozzi,!Patagonia(Road(Tests(New(Sustainability(Legal(Status!(4!January!2012),!Bloomberg!<!
http://www.bloomberg.com/news/2012U01U04/patagoniaUroadUtestsUnewUsustainabilityUlegalUstatus.html>.!
98
!!Sue!Anne!Reed,!‘Patagonia!Registers!as!First!California!Benefit!Corporation!on!The(Care2(Team(Blog,(3!January!2012!<!
http://www.care2.com/care2blog/patagoniaUregistersUasUfirstUcaliforniaUbenefitUcorporation.html>.!!
99
!B(Corp<(Firms(with(Benefits!(7!January!2012)!The!Economist!<http://www.economist.com/node/21542432>.!!
100
!They’re(a(B(Corp(2012!(January!2012),!Certified!B!Corporation,!<https://www.bcorporation.net/newsUandU
media/annualUreportU2012/theyreUaUbUcorpU2012>.!
B!Lab!Report!
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!
!
Delaware!!
The!implementation!of!benefit!corporation!legislation!in!Delaware!
!
How!the!legislation!was!introduced!!
!
Public!Benefit!Corporation!Legislation!(SB!47,!147th!General!Assembly)!was!introduced!in!the!
Delaware!General!Assembly!with!biUpartisan!support!on!18!April!2013!and!was!passed!unanimously!
on!17!July!2013.!!Key!players!that!contributed!to!the!successful!adoption!of!the!bill!included!the!
Delaware!Bar,!Chancery!Court!and!elected!officials!who!worked!with!B!Lab!for!a!number!of!years!to!
examine!and!evaluate!options!for!introducing!similar!legislation!(previously!enacted!in!California!and!
12!other!states).101!!B!Lab!was!instrumental!in!connecting!Delaware!officials!and!corporate!lawyers!
to!directors!of!Certified!B!Corporations!to!discuss!the!benefits!business!and!society!could!derive!
from!such!legislative!change.102!!The!support!of!the!Court!of!Chancery!–!the!state’s!court!for!settling!
corporate!disputes!–!and!its!eminence!in!corporate!America!was!essential!in!gathering!further!
support!for!the!bill.103!!The!detail!about!how!the!bill!varies!from!the!model!legislation!is!contained!in!
Appendix!2.!
!
Ultimately,!the!successful!bill’s!primary!sponsor!was!Democrat!Senator!David!Sokola.!!He!was!joined!
by!Representative!Bryon!Short!(also!a!Democrat)!in!supporting!the!legislation!that!has!come!to!be!
known!as!the!‘Public!Benefit!Corporation’!–!the!only!state!to!use!this!term.104!!!!
!
With!more!than!50%!of!US!companies!and!64%!of!the!CNN!Fortune!500!highest!grossing!companies!
operating!in!the!US!incorporated!in!the!state!of!Delaware,!it!is!the!corporation!capital!of!the!US.!!
This!standing!means!that!it!significantly!impacts!the!views!of!legislators!in!other!US!states.105!!In!fact,!
B!Lab!coUfounder,!Jay!Coen!Gilbert!believes!Delaware!will!be!the!‘tipping!point’!that!catalyses!other!
states!to!embrace!the!adoption!of!the!new!legislation.106!
!
Due!to!its!recent!implementation,!there!is!little!publicly!available!information!on!how!the!new!
legislation!has!affected!the!corporate!legal!scene!in!Delaware.!!In!the!first!three!months!after!the!
introduction!of!the!legislation,!55!public!benefit!corporations!were!either!incorporated!or!converted!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
101
!Jay!Coen!Gilbert,!Is(Delaware(a(tipping(point(in(the(evolution(of(capitalism?!(18!April!2013)!Stanford!Social!Innovation!
Review,!<http://www.ssireview.org/blog/entry/every_500_years_or_so>!
102
(Delaware(Benefit(Corporation(Legislation,!B!Lab,!
<http://benefitcorp.net/storage/documents/Delaware_Benefit_Corporation_Legislation.pdf>.!
103
!Gene!Takagi,(All(Eyes(on(Delaware’s(Public(Benefit(Corporation(Legislation!(20!May!2013)!Nonprofit!Law!Blog,!
<http://www.nonprofitlawblog.com/allUeyesUonUdelawaresUpublicUbenefitUcorporationUlegislation/>.!
104
!http://www.legis.delaware.gov/LIS/LIS147.NSF/vwLegislation/SB+47?Opendocument!
105
!Ibid.!!
106
!Alicia!E.!Plerhoples,!Delaware(Public(Benefit(Corporations(90(Days(Out:(Who's(Opting(In?,!Georgetown!University!Law!
Center,!Delaware(Unveils(Public(Benefit(Corporation(Legislation((18!April!2013)!State!of!Delaware,!
<http://news.delaware.gov/2013/04/18/delawareUunveilsUpublicUbenefitUcorporationUlegislation/>.!!
B!Lab!Report!
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!
!
to!public!benefit!corporations.107!!This!is!a!seemingly!minute!number!compared!to!Delaware’s!
almost!one!million!corporations,!however!the!number!of!benefit!corporations!is!projected!to!
outnumber!California!over!the!first!twelve!months!of!its!relevant!effective!legislation.108!
!
The!‘public!benefit’!that!Delaware!public!benefit!corporations!are!bound!to!provide!and!adhere!to!is!
almost!identical!to!the!benefit!set!out!under!the!Internal!Revenue!Code!(IRS)!Section!501(c)(3)!which!
is!used!to!exempt!nonUprofit!organisations!from!federal!income!taxes.109!!As!such,!most!public!
benefit!corporations!in!Delaware!could!be!incorporated!as!a!nonUprofit!organisation!and!avoid!
taxation.!!It!is!possible!that!the!corporations!that!have!opted!into!the!new!public!benefit!corporation!
form!to!date!have!done!so!in!order!to!establish!a!sustainable!business!model!that!is!not!reliant!on!
taxUexempt!donations!like!a!standard!charity.110!!Another!reason!for!incorporation!or!conversion!as!a!
public!benefit!corporation!rather!than!a!nonUprofit!is!to!avoid!the!strict!IRS!regulations!that!force!a!
company!to!prove!its!reliance!on!donations,!as!opposed!to!a!sustainable!business!model,!in!order!to!
gain!access!to!taxUexemption.111!!
Company!case!study:!Plum!Organics,!Delaware!
!
BACKGROUND!
Plum!Organics!is!a!US!baby!food!producer!founded!in!2007!by!CEO!Neil!Grimmer,!Gigi!Lee!Chang,!
and!Sheryl!O’Loughlin.112!!The!company!had!62!employees!as!of!February!2013,!a!number!that!is!
likely!to!have!risen!since!the!company’s!acquisition!by!the!Campbell!Soup!Company!in!September!
2013!and!the!expected!continuation!of!the!43!per!cent!annual!growth!in!the!baby!food!industry!
from!2010!to!2012.113!!In!2012,!Plum!Organics!was!the!fastest!growing!brand!in!baby!food!in!
monetary!value!and!in!percentage!growth,!experiencing!135!per!cent!growth.114!!The!company’s!
target!market!are!parents!who!are!seeking!a!healthy!alternative!for!their!children!and!who!are!
dissatisfied!with!current!options!for!baby!food!–!the!bright!packaging!is!designed!to!introduce!
children!to!healthy!foods!they!would!otherwise!ignore.115!!Plum!Organics!is!also!very!committed!to!
creating!public!benefit,!for!example!by!donating!one!Super!Smoothie!(an!organic!blend!of!fruits,!
veggies,!and!grains)!to!a!disadvantaged!child!for!every!order!placed!on!the!Plum!Organics!website,!
an!initiative!to!help!fortify!the!diets!of!malnourished!children.116!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
107
!Ibid.!!
!Ibid.!
109
!Ibid,!72.!
110
!Ibid,!72.!
111
!Ibid,!72!
112
!Plum(Organics!(February!2013)!Forbes!<http://www.forbes.com/companies/plumUorganics/>.!
113
!N.J.!Camden,!Campbell(to(Acquire(Plum(Organics,(a(Leading(Premium,(Organic(Kids(Nutrition(Company!(23!May!2013)!
Business!Wire!<http://www.businesswire.com/news/home/20130523006411/en/Campbell#.UzrOYK2SzlR>.!
114
!Aman!Singh,!Campbell(Becomes(America’s(First(Public(Company(to(Acquire(a(Public(Benefit(Corporation:(In(Conversation(
with(Plum(Organics’(Cofounder!(9!September!2013)!CSRwire!,<http://www.csrwire.com/blog/posts/1005UcampbellU
becomesUamericaUsUfirstUpublicUcompanyUtoUacquireUaUpublicUbenefitUcorporationUinUconversationUwithUplumUorganicsU
cofounder>.!
115
!Michael!Kanellos,!Silicon(Valley(Food(Boomlet(Gets(Its(First(Big(Acquisition!(23!May!2013)!Forbes!
<http://www.forbes.com/sites/michaelkanellos/2013/05/23/siliconUvalleyUfoodUboomletUgetsUitsUfirstUbigUmerger/>!
116
!Our(Mission,!Plum!Organics!<http://www.plumorganics.com/aboutUus/theUfullUeffect/mission>.!!
108
B!Lab!Report!
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!
As!Delaware’s!Public!Benefit!Legislation!was!only!enacted!in!July!2013,!Plum!Organics!was!originally!
founded!as!a!standard!forUprofit!company.!!However,!the!organisation,!alongside!eight!others,!was!
the!first!in!Delaware!to!adopt!the!new!Public!Benefit!Corporation!Form!on!1!August!2013.117!!!
!
According!to!Grimmer,!the!conversion!of!the!company!to!a!public!benefit!corporation!‘meant!the!
added!leverage!of!a!model!that!places!impact!and!profits!in!the!same!sentence.!!Like!The(Full(
Effect!program,!which!was!launched!this!year!to!target!16!million!kids!who!go!without!daily!meals!
every!day.’118!!There!is!little!publicly!available!information!on!the!impact!that!the!conversion!has!had!
on!Plum!Organics,!however!coUfounder!and!CEO,!Neil!Grimmer,!has!stated!that!the!specific!social!
purpose!requirement!has!been!‘a!natural!extension!of!how!we!do!business.’119!!Ostensibly,!Plum!
Organic’s!focus!on!providing!food!for!malnourished!children!and!their!ecoUconscious!approach!to!
packaging!would!have!qualified!as!the!specific!public!benefit!required!under!the!new!legislation.120!!
!
This!classification!as!a!public!benefit!corporation!allows!the!company!to!pursue!their!longstanding!
goal!to!benefit!nonUfinancial!stakeholders,!predominantly!underprivileged!children,!without!the!risk!
of!being!sued!by!financial!stakeholders!(shareholders)!for!not!maximising!profit.!!!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
117
!Aman!Singh,!As(Delaware(Registers(its(First(Benefit(Corporations,(a(Conversation(with(Early(Adopters((1!August!2013)!
CSRwire!<http://www.csrwire.com/blog/posts/958UasUdelawareUregistersUitsUfirstUbenefitUcorporationsUaUconversationU
withUtheUearlyUadopters>.!
118
!Ibid.!
119
(Associated(Press!(5!August!2013)!Plum!Organics!<http://www.plumorganics.com/APBenefitCorp>.!
120
!DEL.!CODE!ANN.!tit.!8!§!362(a)(1)!(West!2013).!!
!
B!Lab!Report!
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!
!
Maryland!!
The!implementation!of!benefit!corporation!legislation!in!Maryland!
!
How!the!legislation!was!introduced!
!
The!implementation!of!benefit!corporation!legislation!in!Maryland!was!marked!by!strong!biUpartisan!
political!support,!leadership!from!the!business!community!and!a!willingness!to!embrace!the!
innovative!and!pioneering!corporate!structure.!!Jim!Epstein,!Chairman!of!EFO!Capital!Management,!
was!among!the!earliest!supporters!of!benefit!corporations!and!was!responsible!for!connecting!B!Lab!
to!Maryland!Senator!Jamie!Raskin,!in!November!2009.121!!Within!30!days!of!meeting!B!Lab,!Senator!
Raskin!introduced!House!Bill!1009!to!the!Maryland!legislature.!!Those!who!gave!testimony!included!
Laura!E.!Jordan,!Esq,!Managing!Principal,!The!Capital!Law!Firm!and!Amy!Kincaid,!Principal,!
ChangeMatters.!!B!Lab,!in!conjunction!with!William!H.!Clark,!Principal,!DrinkerBiddle,!was!
responsible!for!drafting!the!legislation.122!!The!legislation,!sponsored!by!Senator!Raskin!and!Senator!
Brian!Frosh!(both!members!of!the!Democratic!Party),!was!successfully!passed!in!the!House!125U13!
and!was!passed!unanimously!in!the!Senate.123!!The!bill!was!signed!into!law!by!Maryland!Governor!
Martin!O’Malley!on!13!April!2010!and!became!effective!on!11!October!2010.124!
!
On!1!October!2010,!the!day!registration!opened!to!allow!companies!to!register!as!benefit!
corporations,!eleven!local!businesses!signed!on!for!the!new!corporate!legal!status.125!!Among!the!
first!to!register!were!The!Big!Bad!Woof!and!Blessed!Coffee,!two!local!businesses!in!the!Maryland!
area.126!!Since!the!legislation!was!passed!in!2010,!over!80!companies!have!elected!to!become!benefit!
corporations!in!Maryland.127!
Company!case!study:!The!Big!Bad!Woof,!Maryland!
!
BACKGROUND!
Founded!in!March!2005,!The!Big!Bad!Woof!is!a!pet!retail!store!based!in!Maryland!with!a!strong!
community!focus.!!It!is!dedicated!to!supplying!premium,!organic!produce!for!pets!and!supplying!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
121
!B!Corporation,!Our(History!<http://www.bcorporation.net/whatUareUbUcorps/theUnonUprofitUbehindUbUcorps/ourU
history>.!
122
!Gene!Takagi,’!Maryland’s!Benefit!Corporation’!on!Gene!Takagi’s!Nonprofit!Law!Blog!(May!26!2010)!
<http://www.nonprofitlawblog.com/marylandsUbenefitUcorporation/>.!
123
!Sen.!Jamie!Raskin,!Governor(Signs(Bill(Making(Maryland(the(First(State(in(the(Union!(11!May!2010)!
<http://jamieraskin.com/p/salsa/web/press_release/public/?press_release_KEY=620>.!
124
!Ibid.!
125
!Ibid.!
126
!Jeremy!Borden,!‘Takoma!Park!coffee!company!is!among!first!‘benefit!corporations’!in!state’,(Washington(Post!(online),!
17!September!2011!<http://www.washingtonpost.com/local/takomaUparkUcoffeeUcompanyUisUamongUfirstUbenefitU
corporationsUinUstate/2011/09/16/gIQARQzdYK_story.html>!
127
!Benefit!Corp!Information!Center,!Find(a(Benefit(Corp,!<http://benefitcorp.net/findUaUbenefitUcorp/search>.!
B!Lab!Report!
29!
!
!
environmentally!friendly!items,!Fair!Trade!goods!and!merchandise!sourced!from!local!partners.128!
Owned!by!Pennye!JonesUNapier!and!Julie!Paez,!the!small!retail!company!employs!1U10!staff!and!has!
two!locations!in!Takoma!Park,!Washington!DC!and!Hyattsville,!Maryland,!with!a!third!to!open!in!
Silver!Spring,!Maryland.129!
!
The!Big!Bad!Woof!advocates!a!triple!bottom!line!approach!to!their!business,!recognising!the!
importance!of!environmental!sustainability!and!the!community!as!well!as!profit.!!This!is!illustrated!in!
the!company’s!strong!community!ties!with!local!suppliers!and!its!partnerships!with!animal!rescue!
organisations!including!the!Humane!Society!of!the!United!States,!the!Washington!Humane!Society,!
the!Washington!Animal!Rescue!League!and!Greyhound!Rescue!to!run!adoption!events!inUstore!and!
to!advocate!for!animal!welfare.!130!!Additionally,!The!Big!Bad!Woof!runs!monthly!Woof!Clinics!aimed!
at!educating!pet!owners!on!pet!health,!nutrition,!training!and!offers!interestUfree!store!accounts!for!
regular!customers!currently!unable!to!pay!for!their!purchases.131!!
!
The!Big!Bad!Woof!was!the!first!business!to!become!a!benefit!corporation!in!Maryland!and!the!US!
and!changed!to!the!new!legal!structure!on!the!first!day!of!registration!in!October!2010.132!!For!owner!
Penny!JonesUNapier,!the!decision!to!become!a!benefit!corporation!was!a!natural!extension!of!the!
company’s!existing!dedication!to!sustainable!and!ethical!business!practices:!‘We!feel!strongly!that!
doing!good!helps!increase!bottom!line!profits…!There!should!be!a!standard!in!being!able!to!say!that!
you!can!run!a!business!well,!give!back!to!the!community!and!make!a!profit.’133!!Becoming!a!benefit!
corporation!was!a!way!to!ensure!that!the!company!remained!faithful!to!its!ethos!of!sustainable!and!
ethical!business!practices!by!making!its!values!legally!binding.!!According!to!JonesUNapier,!‘There!has!
to!be!a!social!benefit!tied!to!the!corporate!status.!!So,!it’s!a!forUprofit!company,!but!it!ties!into!a!
social!mission,!which!fits!us!like!a!glove.’134!!For!The!Big!Bad!Woof,!the!decision!to!become!a!benefit!
corporation!has!paid!off,!with!support!from!customers!and!the!local!community!as!well!as!healthy!
profits.!!The!Big!Bad!Woof!was!on!track!for!an!annual!turnover!of!$1.4!million!in!2012135!and!turned!
to!the!crowdUfunding!platform!Clovefest!for!their!third!store!in!Silver!Spring,!Maryland.136!!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
128
!LinkedIn,!BBWoof!Inc.<!http://www.linkedin.com/company/bbwoofUincU>.!
!Rachel!Kaufman,!Socially!conscious!pet!store!to!open!third!location,!in!Silver!Spring,!(31!March!2014)!Elevation!DC!
<http://elevationdcmedia.com/devnews/thebigbadwoof_033114.aspx>.!
130
!B!Corporation,!The!Big!Bad!Woof!Inc.!<http://www.bcorporation.net/community/theUbigUbadUwoofUinc>.!
131
!Ibid.!
132
!Jeremy!Borden,!‘Takoma!Park!coffee!company!is!among!first!‘benefit!corporations’!in!state’,(Washington(Post!(online),!
17!September!2011!<http://www.washingtonpost.com/local/takomaUparkUcoffeeUcompanyUisUamongUfirstUbenefitU
corporationsUinUstate/2011/09/16/gIQARQzdYK_story.html>.!
133
!Katie!Kerr,!Holistic!Options!for!Man’s!Best!Friend!at!the!Big!Bad!Woof,!(November!10!2011)!Care2!
<http://www.care2.com/causes/holisticUoptionsUforUmansUbestUfriendUatUtheUbigUbadUwoof.html#ixzz2xg0kjYiX>.!!
134
!Amanda!Goldchain,(The(Big(Bad(Woof(<(man’s(best(friend(with(a(low(carbon(paw(print,!(October!3!2012)!Luri!and!Wilma!
Magazine!<http://www.luriandwilma.com/smartgirl/sustainabizUtheUbigUbadUwoof>.!
135
!Jane!O’Brien,!US(firms(put(social(values(before(big(profits,!(20!May!2012)!BBC!News!
<http://www.bbc.com/news/businessU18089604>.!!
136
!Clovefest,!The(Big(Bad(Woof—New(Silver(Spring(location,!<https://clovest.com/projects/theUbigUbadUwoofUnewUsilverU
springUlocation/overview>.!
129
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Australia!
B!Lab!Report!
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The!need!for!legislative!change!in!Australia!
!
Directors’!duties!
!
PROFIT!MAXIMISATION!VS!PUBLIC!BENEFIT!
Under!current!Australian!corporations!law,!directors!are!bound!by!strict!duties!to!act!with!care,!skill!
and!diligence,!in!good!faith!and!in!the!best!interests!of!the!company!as!a!whole.137!!The!duty!of!
directors!to!act!in!the!best!interests!of!the!company!directly!relates!to!present!and!future!
shareholders!as!well!as!creditors,!who!expect!that!directors’!decisionUmaking!will!be!largely!focused!
on!making!profits,!not!creating!social!impact.138!!
!
In!addition,!the!current!legislation!lacks!any!protective!mechanism!for!directors!wishing!to!create!
public!benefit.!!This!leaves!directors!vulnerable!to!personal!liability!and!accusations!of!breach!of!
fiduciary!duties!by!the!Australian!Securities!and!Investment!Commission!(ASIC),!liquidators!and!
other!corporate!regulators.139!!To!consider!public!benefit,!directors!must!show!a!clear!and!rational!
connection!between!the!creation!of!shareholder!value!and!the!achievement!of!greater!social!
impact.140!!This!precludes!directors!from!including!social!impact!as!a!consideration!alongside(or(in(
lieu(of!profit!if!shareholder!value!is!compromised.!!!
!
Given!the!level!of!scrutiny!corporations!face!from!shareholders!and!the!media,!it!is!of!little!surprise!
that!directors!only!consider!public!benefit!to!the!level!that!is!necessary!to!operate!in!the!market!
whilst!maintaining!a!competitive!edge.!!This!is!further!reinforced!by!the!absence!of!case!law!in!
Australia!that!offers!a!precedent!to!reassure!directors!about!their!liability!if!they!take!public!benefit!
into!account.141!!
!
Without!legislative!change,!it!is!highly!unlikely!that!directors!will!be!comfortable!in!considering!
public!benefit!as!part!of!their!core!business.!!The!enactment!of!benefit!corporation!legislation!would!
give!directors!of!benefit!corporations!the!confidence!to!pursue!a!general!public!benefit!with!the!
peace!of!mind!that!they!are!still!fulfilling!their!fiduciary!duties!and!not!personally!liable.!According!to!
a!prominent!former!company!director,!!
‘Protection([for(directors(seeking(to(act(in(the(interests(of(other(stakeholders](would(be(
beneficial(because(there(is(no(doubt(that(the(threat(of(a(shareholder(suit(<(even(if(we(get(
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
137
!John!A!Purcell!&!Janice!A!Loftus,!‘Corporate!social!responsibility:!Expanding!directors’!duties!or!enhancing!corporate!
disclosure’!(2007)!21!Australian(Journal(of(Corporate(Law.;!James!McConvill,!‘Directors!duties!to!stakeholders:!A!reform!
proposal!based!on!three!false!assumptions’,!(2005)!18!Australian(Journal(of(Corporate(Law.!
138
disclosure’!(2007)!21!Australian(Journal(of(Corporate(Law.!
139
!Nicholas!Miller!&!Jonathan!Garland,!Clayton!Utz,!‘Small!GiantsU!B!Corporation!Advice’,!28!September!2012;!WH!Clarke!&!
Larry!Vranka,!‘The!Need!and!Rationale!for!the!Benefit!Corporation:!Why!it!is!the!legal!form!that!best!addresses!the!needs!
of!social!entrepreneurs,!investors,!and,!ultimately,!the!public’!26!January!2012.!
140
!WH!Clarke!&!Larry!Vranka,!‘The!Need!and!Rationale!for!the!Benefit!Corporation:!Why!it!is!the!legal!form!that!best!
addresses!the!needs!of!social!entrepreneurs,!investors,!and,!ultimately,!the!public’!26!January!2012.!
141
!Ibid.!!!
B!Lab!Report!
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!
!
majority(shareholder(support(<(a(minority(shareholder(can(still(say,(we(don’t(agree,(so(some(
protection(would(help…(it(certainly(might(make(us(feel(more(comfortable.’142((
!
Benefit!corporation!legislation!would!provide!directors!with!the!comfort!required.!!!!!
!
STAKEHOLDER!INTERESTS!!
Under!the!current!legal!framework,!directors!are!not!liable!to!nonUshareholder!stakeholders!for!
failing!to!consider!their!interests.143!!The!only!avenues!available!to!third!parties!seeking!a!legal!
remedy!are!section!1324!of!the!Corporations(Act!or!limited!provisions!in!other!legislation.144!!
Stakeholders!usually!have!little!scope!to!bring!an!action!under!section!1324,!as!it!is!a!requirement!
that!the!company’s!constitution!must!already!include!a!clause!that!mandates!third!party!interests!or!
general!public!benefit!to!be!taken!into!account.!!Even!with!such!a!clause,!the!requirements!to!be!
granted!standing!are!strict!and!difficult!for!a!nonUshareholder!to!prove.!!!!
!
Further,!courts!typically!appreciate!that!directors!have!discretion!to!recognise!and!support!
stakeholder!interests!as!long!as!they!can!be!justified!in!terms!of!the!best!interests!of!the!company.145!
However,!there!is!no!Australian!case!law!regarding!this!issue.!!Without!benefit!corporation!
legislation,!there!is!a!risk!of!litigation!if!directors!decide!to!include!stakeholder!interests!in!their!
decisionUmaking.!!Given!this!ambiguity!about!the!risk!of!potential!liability,!legal!advisers!will!also!be!
unlikely!and!unwilling!to!endorse!such!a!decision!by!directors.146!!
!
THE!CONSTITUTION!
There!is!no!prohibition!against!modifying!a!company!constitution!to!include!a!general!public!benefit!
clause!or!to!permit!or!require!directors!to!take!nonUshareholder!interests!into!account.147!!Despite!
the!fact!there!is!no!penalty!for!failing!to!comply!with!such!a!clause,!directors!are!unlikely!to!be!
comfortable!fulfilling!such!an!obligation!without!legislative!change.!!This!is!primarily!because!the!
impreciseness!and!legal!ambiguity!of!the!meaning!of!these!terms!leaves!directors!potentially!
vulnerable!to!accusations!of!breach!of!their!duties!from!ASIC,!liquidators!and!other!corporate!
regulators.148!!Further,!as!above,!the!absence!of!any!case!law!in!Australia!on!the!issue!of!such!a!
clause!in!a!company!constitution!provides!little!comfort!to!directors!who!are!considering!amending!
the!constitution!to!specify!such!interests!should!be!taken!into!account.149!!!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
142
disclosure’!(2007)!21(Australian(Journal(of(Corporate(Law.!
143
!Ibid.!!!
144
!Gene!Takagi,(All(Eyes(on(Delaware’s(Public(Benefit(Corporation(Legislation!(20!May!2013)!Nonprofit!Law!Blog,!
<http://www.nonprofitlawblog.com/allUeyesUonUdelawaresUpublicUbenefitUcorporationUlegislation/>.!
145
!Clayton!Utz!Advice;!Nicholas!Miller!&!Jonathan!Garland,!‘Small!GiantsU!B!Corporation!Advice’,!28!September!2012.!!!
146
!James!McConvill,!‘Directors!duties!to!stakeholders:!A!reform!proposal!based!on!three!false!assumptions’,!(2005)!18!
Australian(Journal(of(Corporate(Law.!
147
!Corporations(Act!(Cth)!125(2).!
148
!Clayton!Utz!Advice;!Nicholas!Miller!&!Jonathan!Garland,!‘Small!GiantsU!B!Corporation!Advice’,!28!September!2012.!!!
149
!Ibid.!!!
B!Lab!Report!
33!
!
!
CORPORATE!SOCIAL!RESPONSIBILITY!!
There!has!been!increasing!emphasis!placed!on!the!importance!of!corporate!social!responsibility!
(CSR)!for!directors.150!!The!practice!of!CSR!has!now!become!mainstream!in!large!corporations!as!a!
means!of!legitimising!their!operation!in!the!market,!maintaining!a!competitive!advantage,!as!a!risk!
mitigation!strategy!and!for!ensuring!the!longUterm!sustainability!of!the!organisation.!
!!!!
In!Australia,!James!Hardie’s!treatment!of!its!asbestos!mass!tort!liability!serves!to!highlight!the!
repercussions!of!failing!to!recognise!the!importance!of!third!party!interests.151!!This!incident!‘thrust!
the!responsibility!of!corporations!into!the!spotlight’152!by!demonstrating!the!adverse!reaction!and!
damage!that!neglect!of!third!party!interests!can!cause!to!public!image!and!reputation.!!!!
!
With!the!growing!sensitivity!of!the!impact!of!corporations!on!the!environment!and!external!
stakeholder,!directors!can!no!longer!be!oneUdimensional!in!their!approach!to!business.153!!Decisions!
must!balance!traditional!risk!management!strategies!and!shortUterm!profits!with!longUterm!
viability.154!!In!today’s!highly!networked!society,!the!use!of!mainstream!media!channels!and!social!
media!can!powerfully!and!publicly!spotlight!corporate!activity!that!negatively!impacts!the!
environment!or!society.!!With!the!increasing!public!pressure!for!directors!to!consider!the!impact!of!
companies!on!society,!it!is!inevitable!that!creating!public!benefit!will!increasingly!form!part!of!
company’s!strategy.155!!Arguably,!this!rise!of!CSR!causes!confusion!for!directors!in!relation!to!how!
best!to!enact!their!fiduciary!duties.!!Change!to!Australian!law!is!required!to!encourage!and!permit!
public!benefit!to!be!explicitly!considered.!!!!
The!business!case!
!
There!are!a!number!of!aspects!to!the!business!case!for!using!the!benefit!corporation!legal!structure,!
many!of!which!are!explained!above!in!relation!to!the!US.!!These!include!the!differentiation!from!
‘pretenders’!(many!of!whom!may!be!competitors),!attracting!investors,!attracting!and!retaining!
talented!employees,!and!protecting!the!mission.!!Arguably,!these!advantages!for!US!businesses!
would!be!similar!in!the!Australian!market,!although!much!of!the!market!research!that!strengthens!
the!business!case!for!benefit!corporations!has!been!conducted!in!the!US.!!Australian!specific!
consumer!market!research!would!help!to!strengthen!the!business!case!for!such!a!legal!structure!and!
build!the!momentum!for!legislative!change!in!Australia.!!The!limited!Australian!evidence!is!outlined!
in!the!table!below.!
!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
150
!John(A(Purcell(&(Janice(A(Loftus,!‘Corporate!social!responsibility:!Expanding!directors’!duties!or!enhancing!corporate!
disclosure’((2007)!21(Australian(Journal(of(Corporate(Law.!
151
!Ibid.!
152
!Ibid.!
153
154
155
B!Lab!Report!
34!
!
!
!
Proposed!Benefit!
Differentiate!from!pretenders!
Rationale!
Attract!investors!
•
!
•
Rise!of!‘citizen!actionism’!–!individuals!seek!deeper!
involvement!with!social!issues!and!expect!brands!and!
corporations!to!provide!the!means!of!engagement!and!
participation.!This!could!lead!to!a!competitive!advantage!in!
the!marketplace.!!Some!of!the!Australian!evidence!that!
supports!this!assertion!includes:!
o 16%!of!consumers!switched!products!or!services!in!the!
last!year!due!to!its!support!of!a!charity!or!cause156!!
o 83%!of!Australians!claim!it!is!important!for!businesses!
to!address!social!and!community!issues157!
o 58%!of!Australians!state!they!would!switch!brands!if!a!
different!brand!of!similar!quality!supported!a!good!
cause158!
o 57%!of!Australians!purchase!products!that!support!a!
good!cause!at!least!once!a!year159!
o 59%!of!Australians!are!more!likely!to!advocate!a!brand!
that!supports!a!good!cause!over!one!that!doesn’t160!
o 52%!of!Australians!would!help!a!brand!promote!
products!or!services!if!the!brand!supports!a!good!
cause161!
o However,!Australian!brands!need!to!communicate!
their!commitment!to!purpose!–!only!29%!believe!
businesses!are!performing!well!in!addressing!social!
issues162!
In!2005,!AMP!Capital!Investors!published!an!analysis!of!the!
corporate!social!responsibility!rating!technique!used!to!
manage!its!Sustainable!Future!Australian!Share!Fund.!By!
applying!its!rating!technique!to!the!financial!performance!of!
the!300!listed!Australian!companies!over!a!10!year!period,!it!
determined!that!companies!with!a!higher!corporate!social!
responsibility!rating!outperformed!companies!with!a!lower!
corporate!social!responsibility!rating!by!more!than!3%!p.a.!
over!a!4!and!10!year!period.163!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
156!
Cavill+Co,‘Gen!X!and!Y!switch!for!a!cause!when!they!buy’!28!March!2014!<http://www.cavill.com.au/charityUmakesU
consumersUswitchUbrands>!
157!
‘SelfUcentred!Aussies!turn!blind!eye!to!cause!marketing’!28!June!2012!<http://www.marketingmag.com.au/news/selfU
centredUaussiesUturnUblindUeyeUtoUcauseUmarketingU16235/>!
158!
Ibid.!
159
!Ibid.!
160!
Ibid.!
161!
Ibid.!
162!
Ibid.!
163!
M.!Rey!and!T.!Nguyen,!‘Financial!payback!from!environmental!&!social!factors’,!2005,!AMP!Capital!Investors,!Sydney.!
!
B!Lab!Report!
35!
!
!
Attract!and!retain!talent!
•
Protect!mission!
•
There!is!significant!research!outlined!in!the!US!section!that!
employees!are!more!attracted!to!work!for,!and!stay!longer!
with,!an!organisation!that!they!know!contributes!positively!to!
the!community.!There!is!a!need!for!further!research!about!
Australian!employee!behaviour.!
The!legal!structure!protects!the!mission!as!the!company!grows,!
or! as! new! management! or! new! investors! are! brought! in,! or!
even!as!the!ownership!changes.!
!
The!benefit!corporation!legal!structure!can!be!financially!rewarding!for!companies!for!the!reasons!
outlined!above,!as!well!as!improve!corporate!governance!and!create!social!benefit.!!It!also!works!in!
tandem!with!B!Corp!certification!to!distinguish!companies!claiming!social!benefit!through!deceptive!
marketing!from!those!actually!creating!a!real!and!measurable!benefit.!!Buzz!words!such!as!‘green’,!
‘responsible’!and!‘sustainable’!are!increasingly!losing!their!meaning,!whilst!‘benefit!corporation’!and!
‘B!Corp’!signify!a!legal!responsibility!in!the!first!case!and!a!vigorously!assessed!social!responsibility!in!
the!second.!!Consumers!can!therefore!distinguish!between!‘good’!companies!and!good!marketing,!
knowing!that!they!are!aligning!their!spending!power!with!their!values!by!buying!products!through!
benefit!corporations!without!being!overwhelmed!by!the!current!trend!of!‘green!washing.’164!
!
A!broader!benefit!of!the!benefit!corporation!legal!form!is!the!message!its!adoption!by!a!company,!
especially!a!startUup,!sends!to!the!broader!corporate!world.!!A!clear!set!of!values,!emphasised!by!this!
corporate!form,!can!help!forge!the!identity!of!a!new!company!and!alert!investors!looking!for!socially!
responsible!investing!opportunities!to!the!potential!of!the!company.165!!In!this!way,!benefit!
corporation!status!can!be!a!signal!that!leads!to!investment!from!‘ethical’!sources!that!would!
otherwise!be!disinterested!in!supporting!the!company.!
The!case!against!enacting!benefit!corporation!legislation!
!
The!most!compelling!argument!against!legislative!change!in!Australia!mirrors!US!sentiment!–!!
that!there!is!no!need!for!a!new!legal!entity!U!as!existing!Australian!corporate!law!does!not!prevent!
directors!from!considering!external!stakeholders,!the!environment!or!society!at!large.!!The!
Corporations(Act!in!its!current!form!does!not!preclude!the!consideration!of!stakeholder!interests!and!
general!public!benefit,!provided!that!they!are!reconcilable!within!an!evolving!understanding!of!the!
interests!of!the!company.166!!!
!
Further,!the!requirement!that!Australian!companies!comply!with!other!legislative!schemes!such!as!
environmental!protection!laws,!occupational!health!and!safety!regulations!and!industrial!relations!
laws!means!that!directors!are!already!bound!to!look!beyond!traditional!shareholder!interests!when!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
164
!Richard!Dahl,!Green(washing:(do(you(know(what(you’re(buying?((June!2010)!National!Center!for!Biotechnology!
Information!<!http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2898878/>.!
165
!Deborah!Sweeney,!‘B!Corp!Experts!Weigh!In:!Q&A!with!Lisa!Garrison’!on!MyCorporation((3!October!2013)!
<http://blog.mycorporation.com/2013/10/bUcorpUexpertsUweighUinUqaUwithUlisaUgarrison/>.!
166
Australian(Journal(of(Corporate(Law.!!
B!Lab!Report!
36!
!
!
making!decisions.167!!Outside!of!company!law,!there!are!other!regulatory!instruments,!such!as!the!
ASX!Guiding!Principles,!which!require!company!directors!to!give!regard!to!stakeholder!interests!and!
general!social!benefit!as!an!element!of!fulfilling!their!duty!to!act!in!the!best!interests!of!the!
company.168!!It!is!argued!that!the!reputational!damage!that!flows!from!a!failure!to!comply!with!these!
regulations!reinforces!the!mechanisms!already!in!place!to!ensure!general!public!benefit.!!!
!
Corporate!decision!making!today!often!includes!a!consideration!of!long!term!strategy!and!duties!
owed!to!future!shareholders,!meaning!that!directors!may!automatically!consider!nonUshareholder!
interests!and!how!they!can!create!positive!social!impact!as!part!of!the!development!of!corporate!
strategy.!!Australian!companies!are!increasingly!doing!more!than!the!legal!minimum!for!nonU
shareholder!stakeholders!in!an!effort!to!be!seen!as!‘good!citizens’!by!the!general!public.169!!With!
stakeholder!interests!and!creation!of!general!public!benefit!being!intertwined!with!company!
interests,!it!has!arguably!become!an!inevitable!part!of!doing!what!is!in!the!best!interests!of!the!
company.!!Such!an!argument!makes!the!introduction!of!benefit!corporation!legislation!seem!
unnecessary.!!!
!
Finally,!it!has!been!suggested!that!an!amendment!to!the!Corporations(Act!that!would!require!the!
interests!of!stakeholders!to!be!considered!and!creation!of!social!benefit!would!create!uncertainty!
for!directors!by!imposing!conflicting!obligations!to!multiple!groups.170!!Arguably!the!benefit!
corporation!legislation!overcomes!this!issue!by!creating!a!distinct!corporate!form,!which!defines!
directors’!duties!with!sufficient!clarity!to!remove!any!confusion!or!ambiguity.!!!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
167
!R!Baxt,!‘Corporate!law!a!fragile!structure’,!The(Australian(Financial(Review,!19!November!2004,!55.!!
Australian(Journal(of(Corporate(Law.!!
169
!S!Bartholomeusz,!‘New!Director!Plans!Could!Backfire’,!The(Age,(6!April!2005.!!
170
168
B!Lab!Report!
37!
!
!
Achieving!legislative!change:!lessons!for!Australia!
!
!
Despite!the!differences!in!corporate!regulation!between!the!US!and!Australia,!the!US!experience!
highlights!a!number!of!key!lessons!for!the!passage!of!benefit!corporation!legislation!in!Australia.!!
This!section!outlines!a!number!of!strategies!that!are!likely!to!facilitate!the!successful!enactment!of!
legislative!change!in!Australia!at!a!federal!level.!!!
!
First,!additional!research!is!required!to!properly!understand!the!specific!needs!and!demands!of!the!
Australian!business,!consumer!and!investor!market.!!This!greater!level!of!countryUspecific!insight!
would!inform!the!drafting!of!the!proposed!legislation,!and!also!the!creation!of!a!targeted!education!
and!awareness!raising!strategy.!!
!
Secondly,!advocates!for!legislative!change!must!identify!and!work!with!key!political!players!who!
have!capacity!to!garner!support!for!legislative!change!in!parliament.!!The!political!climate!can!
heavily!influence!the!likelihood!of!success!and!should!be!considered!when!gauging!the!appropriate!
timing!for!a!campaign.!!The!experience!in!the!US!illustrates!the!importance!of!the!political!context!
on!the!achievement!of!benefit!corporation!legislation.!!In!addition,!the!timing!of!the!political!
campaign!is!even!more!crucial!in!Australia!than!the!US!as!the!benefit!corporation!legal!form!would!
need!to!be!passed!at!a!federal!level!and!ideally!entail!only!a!single!attempt.!!This!contrasts!with!the!
US!where!legislation!was!passed!on!a!stateUbyUstate!basis,!conferring!greater!flexibility!and!also!
allowing!for!multiple!attempts!to!pass!the!legislation.!
!
Thirdly,!support!from!the!majority!of!the!legal!community!is!important!for!the!successful!enactment!
of!the!legislation.!!Corporate!lawyers!and!the!legal!profession!were!among!the!major!opponents!of!
benefit!corporation!legislation!in!several!US!states.!!Many!corporate!lawyers!expressed!resistance!to!
the!legislation!out!of!concern!for!the!possible!implications!for!clients!they!represented.!!In!the!case!
of!California,!securing!the!support!of!the!Bar!Association!was!critical!to!the!ultimate!passage!of!the!
legislation.!!In!addition!to!securing!support!of!regulatory!bodies!and!professional!organisations!in!
Australia,!the!US!experience!suggests!that!education!and!awarenessUraising!are!important!
components!of!gaining!support!for!benefit!corporation!legislation!among!the!legal!community.!
!
Fourthly,!support!from!the!business!community!is!crucial.!!The!formidable!size!of!the!B!Corp!
community!in!the!US!was!an!important!source!of!support!for!the!legislation!and!a!key!driver!for!
change.!!The!influence!of!the!B!Corp!community!had!grown!to!such!an!extent!that!legislators!and!
politicians!could!not!ignore!the!call!for!benefit!corporations.!!The!momentum!amongst!Australia!
businesses!is!growing!quickly!and!this!needs!to!continue!to!encourage!action!from!the!political!
community.!
!
Finally,!building!interest!among!the!general!public!is!another!important!step!in!garnering!support!for!
benefit!corporation!legislation.!!
!
B!Lab!Report!
38!
!
!
‘Branding’!the!legislation!
!
The!terminology!used!to!identify!and!describe!the!proposed!legislative!changes!in!Australia!can!
ultimately!impact!on!its!level!of!uptake!and!utility.!!The!state!of!Delaware!broke!away!from!the!
standard!typology,!instead!using!the!term!‘public!benefit!corporation’!to!describe!the!new!entity.!!
The!lack!of!clear!distinction!between!the!benefit!corporation!and!its!nonUprofit!equivalent!has!
caused!much!of!the!general!public!to!mistakenly!assume!benefit!corporations!in!Delaware!have!
charitable!purposes.!!!!!
!
In!Australia,!the!choice!of!name!for!the!legislation!is!crucial!to!most!effectively!increase!awareness!
of!the!availability!of!the!benefit!corporation!legal!structure!and!encourage!businesses!to!adopt!the!
corporate!form.!!Additionally,!from!the!point!of!view!of!consumers!and!the!general!public,!ensuring!
clarity!and!consistency!in!the!name!choice!would!assist!in!increasing!the!public!profile!of!benefit!
corporations.!
!
An!additional!factor!to!consider!in!choosing!a!name!is!the!advantages!and!disadvantages!of!clarifying!
the!difference!between!certified!B!Corps!and!benefit!corporations!in!Australia.!!It!appears!that!B!Lab!
in!the!US!intentionally!used!similar!language!to!conflate!the!concepts.!!It!is!questionable!whether!
this!conflation!is!desirable!in!the!Australian!context.!!Given!the!certified!B!Corps!community!is!still!
largely!unknown!in!the!broader!Australian!market,!confusion!between!the!two!categories!would!be!
likely!to!occur!as!they!both!grow!in!prominence.!!
!
!
B!Lab!Report!
39!
!
!
!
!
!
!
!
!
!
!
Appendices!
B!Lab!Report!
40!
!
!
!
!
Appendix!1!*!Table!of!hybrid!corporate!forms!
Corporate!Form!
Benefit!Corporation!
(US!based)!
Purpose!Statement!
Benefit!corporations!must!pursue!a!‘general!public!
benefit’,!meaning!a!material,!positive!impact!on!society!
171
and!the!environment. !!
!
They!can!also!pursue!a!specific!public!benefit!such!as!
preserving!the!environment,!improving!human!health!or!
increasing!the!flow!of!capital!to!entitles!with!a!public]
172
benefit!purpose. !
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
Key!Features!
Directors!are!required!to!consider!the!impact!of!their!
decisions!on!shareholders,!employees,!subsidiaries,!
suppliers,!customers,!the!community,!society!and!the!
local!and!global!environment.!!Additional!reporting!
requirements!are!minimal.!!Benefit!corporations!only!
have!to!publish!an!annual!report!on!their!website,!
detailing!how!they!met!their!chosen!standards.!
Assessment!
Benefit!corporations!achievement!of!their!objectives!is!
measured!against!an!independent!third]party!standard.!
The!legislation!does!not!specify!a!particular!standard,!but!
legislative!guidelines!generally!provide!that!standards!
should!be!comprehensive,!credible,!transparent!and!
developed!by!an!independent!entity!that!has!no!material!
173
or!financial!interest!in!the!use!of!the!standard. !
!
!
!
Community!Interest!
Company!(CIC)!
(UK!based)!
CICs!must!pass!an!initial!Community!Interest!Test!(CIT)!
174
conducted!by!the!Registrar. !The!company!must!
continue!to!pass!this!test!for!the!duration!of!its!life.!!!
!
CICs!must!include!a!community!interest!statement!
declaring!that!its!activities!will!be!carried!on!for!the!
benefit!of!the!community!and!how!this!will!be!
175
achieved. !!
The!CIC!takes!on!the!form!of!a!limited!liability!company!
and!needs!to!make!profits!to!support!its!activities,!
maintain!assets,!generate!dividends!and!contribute!to!the!
176
community. !
!
This!form!aims!to!meet!the!needs!of!organisations!that!
trade!with!a!social!purpose!or!carry!on!other!activities!
that!benefit!the!community.!!!
!
177
CICs!are!subject!to!an!asset!lock.!!This!means!that: !
•
They!cannot!transfer!assets!for!less!than!full!
market!value!unless!subject!to!an!exemption!
•
Dividends!paid!to!shareholders!and!Interest!
paid!on!loans!to!financiers!will!be!subject!to!a!
cap!which!ensures!that!a!profit!is!made!!
•
On!dissolution!any!surplus!assets!must!be!
transferred!to!another!asset!locked!body!once!
all!liabilities!have!been!met.!!!
The!purpose!of!the!asset!lock!is!to!ensure!that!the!assets!
of!a!CIC!are!retained!by!the!company!to!either!support!its!
activities!or!otherwise!benefit!the!community.!
!
Investments!in!CIC!shares!are!limited!by!a!maximum!
178
return!determined!by!a!regulator. !
An!annual!report!must!be!filed!including!its!accounts.!!This!
ensures!transparency!and!that!those!benefiting!from!the!
CIC’s!activities!are!being!properly!recognised!as!
179
stakeholders. !The!report!must!also!detail!how!the!CIC!
meets!its!community!interest!objectives.!!!
!
Low*Profit!Limited!Liability!
Company!(L3C)!
(US!based)!
L3Cs!must!accomplish!one!or!more!charitable!or!
educational!purposes!and!be!formed!solely!to!achieve!
180
those!purposes. !
!
L3C!form!is!a!limited!liability!company!that!combines!
features!of!the!corporation!and,!for!taxation!purposes,!
the!partnership.!!The!profits!generated!by!an!L3C!are!
default!taxed!at!the!member!level!on!the!members’!
The!State!of!Utah!is!the!only!State!that!requires!an!L3C!to!
file!a!report!annually!during!the!month!it!was!formed!or!
183
authorised!to!conduct!business. !!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
174
!Community'Interest'Companies'(2013),!GOV.UK,'<https://www.gov.uk/government/organisations/office]of]the]regulator]of]community]interest]companies>.!!
!Department'for'Business'and'Innovation'Skills,'Community'Interest'Companies:'information'and'guidance'notesA'Chapter'1!(November!2012)!
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/211741/12]1333]community]interest]companies]guidance]chapter]1]introduction.pdf>!
176
!Ibid.!
177
!Ibid.!
178
!Ibid.!
179
!Ibid.!
180
!Brian!Howe,!What'is'an'L3C?,'!Social!Entrepreneurship!Law'<http://www.socialentrepreneurshiplaw.com/l3cs]limited]liability]low]profit]companies.html>.!!
183
!Forming'an'L3C'in'Utah,!Digital!Media!Law!Project,!<http://www.dmlp.org/legal]guide/forming]l3c]utah>.!
175
B!Lab!Report!
42!
!
!
!
Flexible!Purpose!Corporation!
(US!based)!
L3C!businesses!are!not!restricted!by!the!amount!of!profit!
that!they!can!make,!but!there!can!be!no!significant!
181
purpose!that!involves!profit!maximisation. !!It!can!also!
not!have!a!significant!goal!of!accomplishing!political!or!
182
legislative!objectives. !!
individual!tax!return.!!!
!
The!purpose!of!these!organisations!is!to!enable!private!
charitable!foundations!to!make!investments!in!L3Cs!&!
retain!the!tax!advantages!associated!with!the!investment.!!!
FPCs!need!not!specifically!identify!a!broad,!general!public!
interest!purpose.!!It!is!only!required!to!identify!one!or!
more!special!purposes!in!addition!to!normal!business!
184
objectives. !It!can!also!choose!to!promote!positive!or!
minimise!adverse!short!term!or!long]term!effects!of!its!
activities!on!employees,!suppliers,!customers,!creditors,!
community,!society!and!the!environment.!!!
FPCs!are!able!to!specify!the!duration!of!their!existence!
and!can!limit!or!restrict!the!business!of!the!FPC!so!long!as!
185
those!limitations!are!aligned!with!its!stated!purpose. !
There!is!no!requirement!to!be!assessed!or!report!against!a!
third!party!standard.!!FPCs!are!required!however!to!
provide!detailed!reports!(both!annual!and!special!reports)!
on!a!regular!basis.!!!
!
Each!year!the!directors!and!officers!must!establish!
objectives!for!measuring!the!corporation’s!efforts!to!
achieve!its!special!purpose!and!write!an!analysis!of!the!
previous!year’s!efforts,!known!as!the!Management!
186
Discussion!and!Analysis. !!
!
Shareholders!alone!police!a!FPC’s!compliance!with!their!
objectives!through!voting!power!or!derivative!action.!!!
!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
181
!Christopher!Williams,!The'Low'Profit'Limited'Liability'Company'(L3C):'A'new'model'for'Cleantech?!(!13!September!2010)!The!Energy!Collective,!
<http://theenergycollective.com/christopherwilliams/43313/low]profit]limited]liability]company]l3c]new]model]cleantech>.!
182
!Low'Profit'Limited'Liability'Companies,!Law!For!Change'<http://www.lawforchange.org/NewsBot.asp?MODE=VIEW&ID=3273>.!
184
!Katherine!Lofft,!Purvi!Maniar,!Tamar!Rosenberg,!‘Are!Hybrids!Really!More!Efficient?’!(2012)!Business'Law'today.!
185
!Angelica!Salceda,!‘The!Flexible!Purpose!Corporation:!California’s!New!Corporate!Form’!Berkley'Law!(13!December!2011),!
<http://thenetwork.berkeleylawblogs.org/2011/12/13/flexible]purpose]corporation]california%E2%80%99s]new]corporate]form/>.!
186
!Dana!Brakman!Reiser,!The'Next'Big'Thing:'Flexible'Purpose'Corporations'(29!October!2012),!SocentLaw!<http://socentlaw.com/2012/10/the]next]big]thing]flexible]purpose]
corporations/>.!
B!Lab!Report!
43!
!
!
!
Appendix!2!*!Comparison!of!model!legislation!and!individual!state!legislation!
!
!
Overarching!
Language!
Corporate!
Purpose!
Model!legislation!
Delaware!Public!Benefit!
Corporation!
Businesses!required!to!create!
general!public!benefit!defined!as!‘a!
material!positive!impact!on!society!
and!the!environment,!taken!as!a!
whole’!
Businesses!required!to!'operate!in!a!
responsible!and!sustainable!manner'!!
!
Permitted!to!choose!one!or!more!
specific!public!benefit!purposes!
Required!to!choose!one!or!more!
specific!public!benefit!purposes!
Directors!are!required!to!consider!
impact!of!decisions!on!all!
stakeholders!!
Directors!are!required!to!balance!
pecuniary!interests!of!stockholders!and!
the!best!interests!of!those!materially!
affected!by!the!corporation's!conduct.!
!
Directors!are!required!to!consider!
named!specific!public!benefit!
purpose(s)!!
Directors!are!required!to!balance!
named!specific!public!benefit!
purpose(s)!
Required!to!report!publicly!
annually!an!assessment!of!overall!
impact!on!all!stakeholders!against!a!
third!party!standard!
Required!to!report!to!stockholders!!
biennially!with!an!assessment!of!
impact!on!the!interests!of!those!
materially!affected!by!the!
corporation's!conduct!!
!
Flexibility!
Overarching!
Language!
Directors!
Accountability!
Flexibility!
Public!
Transparency!
Overarching!
Language!
B!Lab!Report!
Maryland!
California!
Businesses!are!required!to!create!a!general!public!
benefit,!defined!as!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’.!
!
Required!to!achieve!a!general!public!benefit!
through!a!combination!of!specific!public!benefits.!!
The!list!of!specific!public!benefits!is!inclusive.!!It!
includes:!preserving!the!environment,!improving!
human!health,!promoting!the!arts,!sciences!or!
advancement!of!knowledge!and!the!
accomplishment!of!any!other!particular!benefit!for!
society!or!the!environment.!
Businesses!are!required!to!create!a!general!public!
benefit!which!is!defined!as!a!material!positive!
impact!on!society!and!the!environment,!taken!as!a!
whole,!as!assessed!against!a!third]party!standard,!
from!the!business!and!operations!of!a!benefit!
corporation’.!!!
The!article!of!a!benefit!corporation!may,!but!are!
not!required,!to!state!a!specific!public!benefit.!!This!
includes!providing!low]income!or!underserved!
individuals!or!communities!with!beneficial!products!
or!services,!preserving!the!environment,!improving!
human!health,!increasing!the!flow!of!capital!to!
entities!with!a!public!benefit!purpose!and!the!
accomplishment!of!any!other!particular!benefit!for!
society!or!the!environment.!!!
Directors!must!consider!the!impacts!of!any!action!
on!employees,!customers,!the!community,!the!local!
and!global!environment,!the!short!term!and!long]
term!interests!of!the!corporation!and!the!ability!of!
the!corporation!to!accomplish!its!public!benefit!
purpose.!!!
!
Directors!are!not!required!to!give!priority!to!any!
particular!factor!or!person!unless!the!corporation!
so!states!in!its!articles.!!!
Directors!should!consider,!in!determining!the!best!
interests!of!the!benefit!corporation,!the!effects!of!
the!decision!on!stockholders,!employees!and!the!
workforce!(including!subsidiaries),!customers!and!
community!and!societal!considerations!including!
the!global!and!local!environment!and!any!other!
factors!the!director!believes!should!be!considered.!
!
Directors!do!not!have!any!duty!towards!
beneficiaries!of!the!benefit!corporation’s!public!
benefit.!
Directors!to!consider!the!effects!on!stockholders,!
employees,!customers!and!community!and!societal!
considerations!in!its!reasonable!assessment!of!the!
best!interests!of!the!benefit!corporation.!!!
Benefit!corporations!must!deliver!an!annual!report!
to!stockholders!addressing!the!ways!it!pursued!its!
general!public!benefit,!its!specific!public!benefit!
and!the!extent!to!which!the!general!and!specific!
public!benefit!was!created.!!It!must!also!include!any!
circumstances!that!have!hindered!the!creation!of!
its!public!benefit!and!an!assessment!of!its!societal!
and!environmental!performance,!measured!by!the!
The!Directors!must!consider!the!ability!of!the!
benefit!corporation!to!accomplish!its!specific!public!
benefit!purpose!when!making!decisions.!!!
The!corporation!must!assess!its!overall!social!and!
environmental!performance!annually!to!
shareholders!and!the!public!using!an!independent!
third]party!standard.!!This!includes!reporting!on!
how!it!pursued!its!general!public!benefit!goals!and!
any!circumstances!that!hindered!the!creation!of!
that!benefit.!!The!statement!must!be!sent!to!
shareholders!and!posted!on!the!company’s!website!
44!
!
!
!
Flexibility!
Required!to!report!publicly!
annually!an!assessment!of!impact!
on!any!named!specific!public!
benefit!purposes!!
!
Required!to!report!to!stockholders!
biennially!an!assessment!of!impact!on!
any!named!specific!public!benefit!
purpose(s)!and!permitted!to!report!
publicly!more!frequently!using!third!
party!standard!and/or!certification!
third!party!standard.!!Reports!are!to!be!delivered!to!
each!stockholder!within!120!days!of!the!end!of!the!
benefit!corporation’s!financial!year.!!The!most!
recent!reports!must!also!be!publically!available!on!
the!company’s!website.!
!
!
!
Reports!are!to!be!available!to!each!stockholder!
within!120!days!of!the!conclusion!of!the!benefit!
corporation’s!financial!year!and!must!also!be!
publically!available!on!the!company’s!website.!
!
Third!party!standard!defined!as!‘a!means!of!
defining,!reporting!and!assessing!best!practises!in!
corporate!social!and!environmental!performance’!
as!developed!by!an!independent!party!and!is!
transparent.!
within!120!days!following!the!end!of!the!fiscal!year.!
The!assessment!does!not!need!to!be!audited!or!
certified!by!a!third!party.!!The!criteria!and!standard!
development!process!must!be!made!publicly!
available.!
Required!to!report!annually!how!the!benefit!
corporation!pursued!any!specific!public!benefit!
goals!during!the!year!and!any!circumstances!that!
hindered!the!creation!of!the!public!benefit.!!!The!
statement!must!be!sent!to!shareholders!and!posted!
on!the!company’s!website!within!120!days!
following!the!end!of!the!fiscal!year.!
!
B!Lab!Report!
45!
!
!
!
Appendix!3!*!States!which!have!successfully!enacted!legislation!
Status!of!
legislation!
State!
Legislation!
Sponsors!
Supporters!
Arizona!
Passed,!effective!
December!31!2014!
SB1238!
Rep.!Forese!
Rep.!Pierce!!
Rep.!Thorpe!
Seed!Spot!
Arkansas!
Effective!
HB1510!
!
California!
Effective!
AB361!
Flexible!purpose!
legislation!
Rep.!Whitaker!!!
Rep.!Ferguson!
!
Assembly!member!Huffman!
Colorado!
Passed,!effective!
April!1!2014!
HB13]1138!
!
Rep.!Lee!!
Sen.!Kefalas!
!
Delaware!
Effective!
SB47!
Sen.!Sokola!
Hawaii!
Effective!
SB!298!
Sen.!Ihara!
Sen.!Chun!Oakland!!
Sen.!Green,Sen.!Solomon!
American!Sustainable!Business!Council,!!
Jonathan!Storper,!Donald!Simon,!John!Montgomery,!
SVN,!SB]Cal,!New!Voice!of!Business,!Green!Chamber!
of!Commerce,!Green!America,!CAMEO,!CAC,!Build!It!
Green,!ASBC,!ACE,!CAC,!Bay!Area!Council,!
Montgomery!&!Hansen,!HansonBridgett,!Care2.com,!
Patagonia,!RSF!Social!Finance,!Donald!Simon,!Wendel!
Rosen!Black!&!Dean!and!Green!Seal.!!!!
The!Alliance!for!a!Sustainable!Colorado,!UL,!
!LLC!(Underwriters!Laboratories)!SB!182,!UL,!LLC!
(Underwriters!Laboratories)!SB!003,!Green!America!
!
B!Lab!
Gary!Hooser!
Key!strategies!
Fundraising!by!Seed!Spot!
!
Arizona!lobbyist!firm!Goodman!Schwartz!Public!Affairs!
187
enlisted!to!obtain!support!for!the!legislation !
!
!
Joint!effort!by!the!American!Sustainable!Business!
188
Council!and!B!Lab !
!
Support!by!leading!businesses!and!community!
189
leaders !
!
!
190
Civilian!activism!and!petitioning!through!Care!2.com !
Joint!effort!by!the!Alliance!for!a!Sustainable!Colorado,!
191
Colorado!businesses!and!B!Lab !
Support!by!Gov.!Markell,!the!Delaware!State!Bar!
Association,!the!Delaware!Court!of!Chancery!and!the!
192
Secretary!of!State !
Support!from!legislators!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
187
!Ryan!Randazzo,!Law'allows'benefit'corporations'in'Arizona!(May!6!2013)!AZ!Central!
<http://www.azcentral.com/business/buzz/articles/20130502law]allows]benefit]corporations]arizona.html?nclick_check=1>.!
188
!Sue!Anne!Reed,!‘Patagonia!Registers!as!First!California!Benefit!Corporation!on!The!Care2!Team!Blog,!3!January!2012!<http://www.care2.com/care2blog/patagonia]registers]as]first]california]benefit]
corporation.html>.!
189
!B!Lab!Annual!Report!2012,!Certified!B!Corporation!
<https://www.bcorporation.net/sites/all/themes/adaptivetheme/bcorp/pdfs/BcorpAP2012_Web]Version.pdf>.!
190
!Ibid.!
191!!
Seth!Henry,!Colorado!Passes!Benefit!Corporation!Legislation!(May!16!2013)!Alliance!for!Sustainable!Colorado!
<http://www.sustainablecolorado.org/blog/economic]development]sustainable]business/colorado]passes]benefit]corporation]legislation>.!
192
!Delaware!Unveils!Public!Benefit!Corporation!Legislation,!(April!18!2013)!State!of!Delaware,!<http://news.delaware.gov/2013/04/18/delaware]unveils]public]benefit]corporation]legislation/>.!
B!Lab!Report!
46!
!
!
!
Illinois!
Effective!
SB2897!
!
Louisiana*!
Effective!
!HB1178!
Maryland!
Effective!
SB690!
HB1009!
!
Sen.!Espero!
Sen.!Fukunaga!
Sen.!Gabbard!
Sen.!Galuteria!Sen.!Ige!
!Sen.!Nishihara,!Sen.!Ryan!
Sen.!Slom!
Sen.!Taniguchi,!
Sen.!Tokuda!
Sen.!akai,!Rep.!C.!Lee,!Rep.!
Browner,!Rep.!Carroll,!Rep.!
Evans,!Rep.!Hanohano,!Rep.!M.!
Lee,!Rep.!Morita,!Rep.!
Nakashima,!Rep.!Aquino,!Rep.!
Awana,!Rep.!Chang,!Rep.!Chong,!
Rep.!Choy,!Rep.!Cullen,!Rep.!
Hashem,!Rep.!Mizuno,!Rep.!
Nishimoto,!Rep.!B.!Oshiro,!Rep.!
Pine,!Rep.!Tsuji,!Rep.!Yamashita!
!
Sen.!Frerichs!
Sen.!Noland!
Sen.!Collins,!
Sen.!Steans!
Rep.!Feigenholtz!
Rep.!Sente!
Rep.!Thapedi!
Rep.!Zalewski!
Rep.!Barickman!
Rep.!Leger!
Rep.!Ortego!
Sen.!Raskin!
Sen.!Frosh!
Sen.!Feldman!!
UL,!LLC!(Underwriters!Laboratories)!
!
!
Support!from!leading!businesses
193!
!
!
!
New!Orleans!Business!Alliance!
Jim!Epstein!
Michael!Shuman!
Joint!effort!by!the!New!Orleans!Business!Alliance!and!
B!Lab!
!
Assistance!by!GNO!Inc.!in!the!passage!of!legislation!
194
through!the!Senate !
!
!
!
195
Support!from!leading!businesses !
!
Joint!effort!by!B!Lab!and!Senator!Raskin!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
193!!
Tim!Frick,!Illinois!B!Corp!Legislation!Passes!in!the!Senate!(31!March!2012)!Mighty!Bytes!<http://www.mightybytes.com/blog/illinois_b_corp_legislation_passes_in_the_senate/>.!
!
Shareable,!Louisiana!Becomes!8th!State!To!Approve!B!Corps!<http://www.shareable.net/blog/louisiana]becomes]8th]state]to]approve]b]corps>.
195
!Sen.!Jamie!Raskin,!Governor!Signs!Bill!Making!Maryland!the!First!State!in!the!Union!(11!May!2010)!!<http://jamieraskin.com/p/salsa/web/press_release/public/?press_release_KEY=620>.!
194!!
B!Lab!Report!
47!
!
!
!
!
Massachusetts!
Effective!
H4352!
Sen.!Joyce!
Preserve!
Social!(k)!
Dimagi!
Nevada!
Effective!
AB89!
Assemblyman!Bobzien!
!
New!Jersey!
Effective!
S2170!
New!York!
Effective!
A4692]a!!S79]a!
Sen.!Ruiz!
Sen.!Kean!Jr.!
Assembly!member!Wagner!
Assembly!member!Stender!
Assembly!member!O'Donnell!
Speaker!Silver,!Sen.!Squadron!
!
The!Nevada!Secretary!of!State,!The!Nevada!
Governor's!Office!of!Economic!Development,!The!City!
of!Reno,!The!Sierra!Club,!The!Nevada!Conservation!
League,!The!Progressive!Leadership!Alliance!of!
Nevada,!The!Nevada!Renewable!Energy!Accelerator,!
The!Reno!Chamber!of!Commerce,!The!Las!Vegas!
Chamber!of!Commerce,!The!Retail!Association!of!
Nevada,!The!Reno!Collective,!Patagonia!
Natural!Systems!Utilities!
ASBC,!Buffalo!First,!Local!First!Ithaca,!NYS!B!Corps,!
Singlebrook!Technology!
Joint!effort!by!the!American!Sustainable!Business!
196
Council!and!Senator!Joyce !
!
197
!
Support!from!legislators!
!
198
Joint!effort!by!Assemblyman!Bobzien!and!B!Lab !
199
Support!from!legislators !
!
Joint!effort!by!B!Lab,!Buffalo!First!and!the!American!
200
Sustainable!Business!Council !
!
201
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
196!!
Walter!Frick!Calling!All!Social!Entrepreneurs:!Who!Will!Be!Massachusetts'!First!'Benefit!Corporation'?!(10!August!2012)!Bostinno!!<http://bostinno.streetwise.co/all]series/calling]all]social]entrepreneurs]
who]will]be]massachusetts]first]benefit]corporation/>.!
197!!
Shira!Schoenberg,!Massachusetts!companies!create!socially!responsible!'benefit!corporations'!(4!December!2012)!MassLive!
!
<http://www.masslive.com/politics/index.ssf/2012/12/massachusetts_companies_create.html>.
198
!Zach!Yeager,!New'Bill'May'Bring'Benefit'Corporations'to!Nevada!(February!11!2013'Nevada!Media!Alliance!<http://nevadamediaalliance.org/2013/02/11/new]bill]may]bring]benefit]corporations]to]
!
nevada/>.
199!
!Stacy!Jones,!Growing'community'of'social'entrepreneurs'look'for'ways'to'establish'legitimacy!(5!February!2012)!NJ!News!
<http://www.nj.com/business/index.ssf/2012/02/growing_community_of_social_en.html>.
200
!Andrew!Delmonte,!New!York!State!Senate!and!Assembly!Pass!Benefit!Corporation!Legislation!(28!June!2011)!Buffalo!Rising!<http://buffalorising.com/2011/06/new]york]state]senate]and]assembly]pass]
benefit]corporation]legislation/>.!
201
!John!Farley,!Will!Benefit!Corporations!Change!the!Way!NYC!Does!Big!Business?!!(14!December!2011)!Thirteen.org!!<http://www.thirteen.org/metrofocus/2011/12/will]benefit]corporations]change]the]
way]nyc]does]big]business/>.!
B!Lab!Report!
48!
!
!
!
Oregon!
Effective!
HB2296!
Secretary!of!State!Brown!
Rep.!Read!
Rep.!Bailey!
Pennsylvania*!
Effective!
HB1616!
Rep.!Denlinger!
Rep.!DePasquale!
Rep.!Cutler!
Rep.!Bloom!
Rep.!Boyd!
Rep.!Briggs!
Rep.!Cohen!
Rep.!Creighton!
Repr.!Daley!
Rep.!Fleck!
Rep.!Gabler!
Rep.!Geist!
Rep.!Grove!
Metropolitan!Group,!Equilibrium!Capital!Group,!
Pinpoint!Logic,!gDiapers,!Better!World!Club,!Celilo!
Group!Media,!Hawthorne!Auto!Clinic,!Inc.,!Eleek,!
Bamboo!Sushi,!Brightworks,!Celia!Mueller!CFP,!
PlanGreen,!Diane!Dulken!Strategies,!Eleven!Wireless,!
Resource!Recognition!and!Regeneration!Ranch,!
Activate!Hub,!Portland!Woolen!Mills,!WellBalance,!
Michael!Olaf,!Montessori!Company,!ONABEN:!A!
Native!American!Business!Network,!Back!Into!Your!
Body,!National!Sustainable!Sales,!Social!Enterprises!
Inc.,!True!Nature!Wellness,!LLC,!Adaptation!Services,!
Green!Rising,!Trovi,!Fishpeople,!Endurawood,!
Sustainable!Solutions!Unlimited,!Changents,!Indow!
Windows,!Canvas!Dreams,!Supportland,!Immix!Law!
Group,!Artemis!Foods,!Green!Building!
Services/BuildingInsigts!LLC,!EcoZoom,!Elements!
Naturals!LLC,!B]Line,!Sustainable!Harvest,!Preciva!
Incorporated,!Prem!Group,!Freeflow!Digital,!Alima!
Cosmetics,!Inc.,!Idealist!Consulting,!Miller!Nash!LLP,!
Inesscents!Aromatic!Botanicals,!FMYI,!Speak!Shop,!
AXIS!Performance!Advisors,!Inc.,!Ecotrust!Forest!
Management,!Capital!Pacific!Bank,!TriLibrium,!New!
Outlook!Financial,!LLC,!Blue!Tree!Strategies,!Medford!
Fabrication!
SBN!Philadelphia!and!the!Fay]Penn!Economic!
Development!Council,!Vertex,!Dansko,!and!Ben!
Franklin!Technology!Partners!
202
!
203
Support!from!the!Oregon!Business!Association !
Support!from!leading!businesses!and!community!
204
leaders !
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
202
!Tony!Green,!Record!number!of!Oregon!businesses!register!as!benefit!companies!on!day!1!of!new!law,!!(2!January!2014)!Oregon!Secretary!of!State!Kate!Brown!
!
<http://oregonsosblog.us/2014/01/record]number]oregon]businesses]register]benefit]companies]day]1]new]law/>.
203!
Davis!Smith,!Benefit'Corporations:'Why'aren’t'Utah'businesses'living'a'balanced'existence?,'(March!9!2014)!Deseret!News!<http://www.deseretnews.com/article/865598234/Benefit]Corporations]Why]
!
arent]Utah]businesses]living]a]balanced]existence.html>.
204!
State!Representative!Gordon!Denlinger,!Denlinger!B]Corp!Bill!Heads!to!Governor!<http://www.repdenlinger.com/NewsItem.aspx?NewsID=15534>.!
B!Lab!Report!
49!
!
!
!
Rep.!Hickernell!
Rep.!Killion!
Rep!Longietti!
Rep.!Milne!
Rep.!Mur!
Rep.!Pyle!
Rep.!Rapp!
Rep.!Swanger!
Rep.!Wagner!
Rep.!Payton!
Rep.!Tanzi!!
Rep.!Blazejewski!Rep.!Ajello!
Rep.O`Grady!Rep.Valencia!
Rep.!Stringer!
Rep.!Weeks!
Sen.!Sheheen!
Sen.!Valentine!
Rhode!Island!
Effective!
HB5720!
South!Carolina!
Effective!
HB4766!
Utah!
Passed,!effective!
May!13!2014!
!
SB133!
Vermont!
Effective!
S.263!!
Sen.!Shumlin!
Sen.!Miller!
!
Virginia*!
Effective!
HB2358!
Delegate!McClellan,!
Delegate!Brink!
Delegate!Cline!
Delegate!Dance!
Delegate!Herring!
Delegate!Kory!
Delegate!Lingamfelter!
205
!
South!Carolina!Chamber!of!Commerce!!
!
!
!
206
leaders !
!
207
208
leaders !
!
VBSR,!VEOC,!Merritt!&!Merritt!&!Moulton,!Jeffrey!
Hollender,!Seventh!Generation,!!Ben!Cohen!and!Jerry!
Greenfield,!Ben!&!Jerry's,!Jim!Feinson,!Gardener's!
Supply!Company,!Ken!Merritt!
!
Impact!Makers!
!
209
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
205!!
Tim!Faulkner,!Rhode!Island!to!allow!companies!with!a!conscience,!(12!July!2013)!ecoRI.!
!
<http://www.ecori.org/green]economy/2013/7/12/rhode]island]to]allow]companies]with]a]conscience.html>.
206
!Davis!Smith,!Benefit!Corporations:!Why!aren’t!Utah!businesses!living!a!balanced!existence?,!(March!9!2014)!Deseret!News!<http://www.deseretnews.com/article/865598234/Benefit]Corporations]Why]
arent]Utah]businesses]living]a]balanced]existence.html>.!
207
!!Ibid.!
208!!
Dan!D’Ambrosio,!‘State!open!to!benefit!corporations’!The!Burlington!Free!Press!(online)!8!July!2011.!
<http://www.launcht.com/wp]content/uploads/2012/03/State]open]to]benefit]corporations]The]Burlington]Free]Press.pdf>.!
209
!
!Zak!Kozuchowski,!New!Virginia!law!adds!legal!structure!of!‘benefit!corporations!(1!June!2011),!Virginia!Business!<http://www.virginiabusiness.com/news/article/a]new]type]of]company>.
B!Lab!Report!
50!
!
!
!
Washington!DC!
Effective!!
Social!Purpose!
Legislation!
B19]0584!
!
Chairman!!
Mendelsohn!
Council!member!Cheh!
Council!member!M.!Brown!
Jim!Epstein,!EFO!Capital!Management;!Laura!Jordan,!
The!Capital!Law!Firm;!Amy!Kincaid,!Change!Matters;!
Andy!Shallal,!Busboys!&!Poets!!
210
Collaboration!with!local!businesses !
!
leaders!
*!Passed!unanimously!!!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
!
210!
!Catherine!Ho,!‘How!a!local!attorney!became!an!advocate!for!the!national!benefit!corporation!movement’,!Washington'Post!(online)!31!December!2012!
<http://www.washingtonpost.com/business/capitalbusiness/how]a]local]attorney]became]an]advocate]for]the]national]benefit]corporation]movement/2012/12/28/d1b0a7d4]50fe]11e2]950a]
7863a013264b_story.html>.!
B!Lab!Report!
51!
!
!
!
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!
Clayton!Utz,!Nicholas!Miller!&!Jonathan!Garland,!‘Small!Giants!Z!B!Corporation!Advice’,!28!
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!!
Camden,!N.J.!Campbell!to!Acquire!Plum!Organics,!a!Leading!Premium,!Organic!Kids!Nutrition!
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<http://www.businesswire.com/news/home/20130523006411/en/Campbell#.UzrOYK2SzlR>!
!
Clovefest,!The!Big!Bad!Woof—New!Silver!Spring!location,!<https://clovest.com/projects/theZbigZbadZ
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!
Corporations!Act!(Cth)!125(2)!
!
The!Corporations!Committee!of!the!Business!Law!Section!of!the!State!Bar!of!California,!letter!to!
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!
Dahl,!Richard,!Green!washing:!do!you!know!what!you’re!buying?!(June!2010)!National!Center!for!
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!
DEL.!CODE!ANN.!tit.!8!§!362(a)(1)!(West!2013)!
!
Delaware!Unveils!Public!Benefit!Corporation!Legislation!(18!April!2013)!State!of!Delaware,!
<http://news.delaware.gov/2013/04/18/delawareZunveilsZpublicZbenefitZcorporationZlegislation/>!
!
Department!for!Business!and!Innovation!Skills,!Community!Interest!Companies:!information!and!
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1333ZcommunityZinterestZcompaniesZguidanceZchapterZ1Zintroduction.pdf>!
!
Department!for!Business!and!Innovation!Skills,!Community!Interest!Companies:!information!and!
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<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/211747/13Z710Z
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!
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!
Field,!Anne,!Becoming!a!Benefit!Corp.!Is!More!Complex!for!Some!Social!Enterprises!(8!March!2012)!
Forbes!<http://www.forbes.com/sites/annefield/2012/08/03/becomingZaZbenefitZcorpZisZmoreZ
complexZforZsomeZsocialZenterprises/>!
!
!
B!Lab!Report!
53!
!
!
!
Forbes,!Plum!Organics!(February!2013)!<http://www.forbes.com/companies/plumZorganics/>!
!
Forming!an!L3C!in!Utah,!Digital!Media!Law!Project,!<http://www.dmlp.org/legalZguide/formingZl3cZ
utah>!
!
Gilbert,!Jay!Coen,!Is!Delaware!a!tipping!point!in!the!evolution!of!capitalism?!(18!April!2013)!Stanford!
Social!Innovation!Review,!<http://www.ssireview.org/blog/entry/every_500_years_or_so>!
!
Goldchain,!Amanda,!The!Big!Bad!Woof!<!man’s!best!friend!with!a!low!carbon!paw!print,!(October!3!
2012)!Luri!and!Wilma!Magazine!<http://www.luriandwilma.com/smartgirl/sustainabizZtheZbigZbadZ
woof>!!
!
Good!News!for!B!Corporations:!AB!361!passes!In!The!CA!Assembly!,!(21!May!2011)!dharma!Merchant!
Services!<http://www.dharmamerchantservices.com/blog/item/goodZnewsZforZbZcorporationsZabZ
361ZpassesZinZtheZcaZassemly>!
!
Community!Interest!Companies!(2013),!GOV.UK,!
<https://www.gov.uk/government/organisations/officeZofZtheZregulatorZofZcommunityZinterestZ
companies>!
!
Grant,!Joseph!Karl,!‘When!Making!Money!and!Making!Sustainable!and!Societal!Difference!Collide:!
Will!Benefit!Corporations!Succeed!or!Fail?’!(2013)!46:3!Indiana!Law!Review!
!
Green,!Tony,!Record!Number!of!Oregon!Businesses!Register!as!Benefit!Companies!on!Day!1!of!New!
Law!(2!January!2014)!Oregon!Secretary!of!State!Kate!Brown!!!
<http://oregonsosblog.us/2014/01/recordZnumberZoregonZbusinessesZregisterZbenefitZcompaniesZ
dayZ1ZnewZlaw/>!
!
Henry,!Seth,!Colorado!Passes!Benefit!Corporation!Legislation!(May!16!2013)!Alliance!for!Sustainable!
Colorado!
<http://www.sustainablecolorado.org/blog/economicZdevelopmentZsustainableZbusiness/coloradoZ
passesZbenefitZcorporationZlegislation>!
!
Honeyman,!Ryan,!B!Corp:!Q&A:!US!Representative!Jared!Huffman!(18!November!2013)!Honeyman!
Sustainability!Consulting!<http://honeymanconsulting.com/2013/11/18/bZcorpZqaZusZ
representativeZjaredZhuffman/>!
!
Howe,!Brian,!What!is!an!L3C?,!!Social!Entrepreneurship!Law!
<http://www.socialentrepreneurshiplaw.com/l3csZlimitedZliabilityZlowZprofitZcompanies.html>!
!
Huffman,!Jared,!AB!361!Benefit!Corporations!(10!August)!Innov8social,!
<http://www.innov8social.com/2011/08/factZsheetZforZabZ361Zcalifornia.html>!
!
B!Lab!Report!
54!
!
!
!
Kanellos,!Michael,!Silicon!Valley!Food!Boomlet!Gets!Its!First!Big!Acquisition!(23!May!2013)!Forbes!
<http://www.forbes.com/sites/michaelkanellos/2013/05/23/siliconZvalleyZfoodZboomletZgetsZitsZ
firstZbigZmerger/>!
!
Kaufman,!Rachel,!Socially!conscious!pet!store!to!open!third!location,!in!Silver!Spring,!(31!March!2014)!
Elevation!DC!<http://elevationdcmedia.com/devnews/thebigbadwoof_033114.aspx>!
!
Kerr,!Katie,!Holistic!Options!for!Man’s!Best!Friend!at!the!Big!Bad!Woof,!(November!10!2011)!Care2!
<http://www.care2.com/causes/holisticZoptionsZforZmansZbestZfriendZatZtheZbigZbadZ
woof.html#ixzz2xg0kjYiX>!
!
King,!Bart,!Louisiana,!South!Carolina!Pass!Benefit!Corporation!Laws,!(June!19!2012)!Sustainable!
Brands!<http://www.sustainablebrands.com/news_and_views/articles/louisianaZsouthZcarolinaZ
passZbenefitZcorporationZlaws>!
!
Lincoln,!Sharon!C.!&!Ellman,!Adrienne!M.!Benefit!Corporations!Have!Arrived!in!Massachusetts!
(January!11!2013)!Boston!Bar!Association—Business!Transactions!Newsletter!
<http://www.bostonbar.org/sections/businessZtransactions/businessZtransactionsZ
newsletter/2013/01/11/benefitZcorporationsZhaveZarrivedZinZmassachusetts>!
!
LinkedIn,!BBWoof!Inc.<http://www.linkedin.com/company/bbwoofZincZ>!!
!
Louisiana!Becomes!8th!State!To!Approve!B!Corps,!Shareable!
<http://www.shareable.net/blog/louisianaZbecomesZ8thZstateZtoZapproveZbZcorps>
!
Lifsher,!Marc,!California!businesses!seek!new!‘benefit!corporation’!status!(3!January!2012)!Los!
Angeles!Times!!<http://articles.latimes.com/2012/jan/03/news/laZcaliforniaZbusinessesZseekZnewZ
benefitZcorporationZstatusZ20120103>!
!
Lofft,!Katherine,!Maniar,!Purvi,!Rosenberg,!Tamar,!‘Are!Hybrids!Really!More!Efficient?!A!DriveZby!
Analysis!of!Alternative!Company!Structures’!(2012)!Business!Law!Today!
!
Low!Profit!Limited!Liability!Companies,!Law!For!Change!
<http://www.lawforchange.org/NewsBot.asp?MODE=VIEW&ID=3273>!
!
McConvill,!James,!‘Directors!duties!to!stakeholders:!A!reform!proposal!based!on!three!false!
assumptions’,!(2005)!18!Australian!Journal!of!Corporate!Law!
!
Noked,!Noam,!‘Benefit!Corporations!vs!Regular!Corporations:!A!Harmful!Dichotomy’!on!The!Harvard!
School!Forum!on!Corporate!Governance!and!Financial!Regulation!(13!May!2012)!
<https://blogs.law.harvard.edu/corpgov/2012/05/13/benefitZcorporationsZvsZregularZcorporationsZ
aZharmfulZdichotomy/>!
!
B!Lab!Report!
55!
!
!
!
O’Connor,!Clare,!Outdoor!Gear!Titan!Patagonia!Names!Rose!Marcario!CEO!As!Company!Bets!on!
Sustainable!Food!(23!January!2014)!
<http://www.forbes.com/sites/clareoconnor/2014/01/23/patagoniaZnamesZfirstZfemaleZceo>!
!
O’Brien,!Jane,!US!firms!put!social!values!before!big!profits,!(20!May!2012)!BBC!News!
<http://www.bbc.com/news/businessZ18089604>!
!
Neetal!Parekh,!This!Just!In...New!York!Passes!Benefit!Corporation!Legislation!(12!December!2011)!
Innov8!Social!!<http://www.innov8social.com/2011/12/thisZjustZinnewZyorkZpassesZbenefit.html>!
!
Our!Reason!for!Being,!Patagonia!<http://www.patagonia.com/us/patagonia.go?assetid=2047>!
!
Performance!Requirements,!Certified!B!Corporation!<http://www.bcorporation.net/becomeZaZbZ
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!
Plerhoples,!Alicia,!Delaware!Public!Benefit!Corporations!90!Days!Out:!Who's!Opting!In?!Georgetown!
University!Law!Center!
!
Pleven,!Liam,!‘When!Doing!Good!Meets!Investing’,!Wall!Street!Journal!(online)!12!July!2013!
<http://online.wsj.com/news/articles/SB10001424127887324694904578598231690128560>!!
!
Plum!Organics,!Our!Mission,!<http://www.plumorganics.com/aboutZus/theZfullZeffect/mission>!
!
Purcell,!John!A!&!Loftus,!Janice!A!‘Corporate!social!responsibility:!Expanding!directors’!duties!or!
enhancing!corporate!disclosure’!(2007)!21!Australian!Journal!of!Corporate!Law!
!
Randazzo,!Ryan,!Law!allows!benefit!corporations!in!Arizona!(May!6!2013)!AZ!Central!
http://www.azcentral.com/business/buzz/articles/20130502lawZallowsZbenefitZcorporationsZ
arizona.html?nclick_check=1!!
!
Raskin,!Sen.!Jamie,!Governor!Signs!Bill!Making!Maryland!the!First!State!in!the!Union!(11!May!2010)!
<http://jamieraskin.com/p/salsa/web/press_release/public/?press_release_KEY=620>!
!
Raskin,!Sen.!Jamie,!Maryland,!the!Delaware!of!Benefit!Corporations,!Creates!a!Different!Path!for!
Socially!Responsible!Business,!(date!unknown)!Law!for!Change!
<http://www.lawforchange.org/NewsBot.asp?MODE=VIEW&ID=3908>!!
!
Ray!QC,!Ross,!‘The!Role!of!the!Attorney!General:!An!Australian!Perspective’,!Speech!given!at!the!
International!Bar!Association!Conference,!Buenos!Aires,!Monday!13!October!2008!
<http://www.lawcouncil.asn.au/lawcouncil/images/LCAPDF/speeches/20081013TheRoleoftheAttor
ney.pdf>.!
!
Salceda,!Angelica,!‘The!Flexible!Purpose!Corporation:!California’s!New!Corporate!Form’!Berkley!Law!
(13!December!2011),!<http://thenetwork.berkeleylawblogs.org/2011/12/13/flexibleZpurposeZ
corporationZcalifornia%E2%80%99sZnewZcorporateZform/>!
!
B!Lab!Report!
56!
!
!
!
Reed,!Sue!Anne,!‘Patagonia!Registers!as!First!California!Benefit!Corporation!on!The!Care2!Team!Blog,!
3!January!2012!http://www.care2.com/care2blog/patagoniaZregistersZasZfirstZcaliforniaZbenefitZ
corporation.html!
!
Schoenberg,!Shira,!Massachusetts!companies!create!socially!responsible!'benefit!corporations'!(4!
December!2012)!MassLive!
<http://www.masslive.com/politics/index.ssf/2012/12/massachusetts_companies_create.html>!
!
!
Singh,!Aman,!As!Delaware!Registers!its!First!Benefit!Corporations,!a!Conversation!with!Early!Adopters!
(1!August!2013)!CSRwire!<http://www.csrwire.com/blog/posts/958ZasZdelawareZregistersZitsZfirstZ
benefitZcorporationsZaZconversationZwithZtheZearlyZadopters>!
!
Singh,!Aman,!Campbell!Becomes!America’s!First!Public!Company!to!Acquire!a!Public!Benefit!
Corporation:!In!Conversation!with!Plum!Organics’!Cofounder!(9!September!2013)!CSRwire,!
<http://www.csrwire.com/blog/posts/1005ZcampbellZbecomesZamericaZsZfirstZpublicZcompanyZtoZ
acquireZaZpublicZbenefitZcorporationZinZconversationZwithZplumZorganicsZcofounder>!
!
‘Specifics!on!Delaware!Benefit!Corporation!Legislation’!(2013)!Benefit!Corp!Information!Center!
<http://www.benefitcorp.net/storage/Delaware_Specifics.pdf>!
!
Sweeney,!Deborah,!‘B!Corp!Experts!Weigh!In:!Q&A!with!Lisa!Garrison’!on!MyCorporation!(3!October!
2013)!<http://blog.mycorporation.com/2013/10/bZcorpZexpertsZweighZinZqaZwithZlisaZgarrison/>!
!
Takagi,!Gene!‘Maryland’s!Benefit!Corporation’,!Gene!Takagi’s!Nonprofit!Law!Blog!(May!26!2010)!
<http://www.nonprofitlawblog.com/marylandsZbenefitZcorporation/>'
!
Talley,!Eric,!‘Corporate!Form!and!Social!Entrepreneurship:!A!Status!Report!from!California!(and!
Beyond)!(Working!Paper),!University!of!California,!Berkley!10!September!2012!!
!
The!Non<Profit!Behind!B!Corps,!Certified!B!Corporation,!<http://www.bcorporation.net/whatZareZbZ
corps/theZnonZprofitZbehindZbZcorps>!
!
They’re!a!B!Corp!2012!(January!2012),!Certified!B!Corporation,!!
<https://www.bcorporation.net/newsZandZmedia/annualZreportZ2012/theyreZaZbZcorpZ2012>!
!
Tozzi,!John,!Patagonia!Road!Tests!New!Sustainability!Legal!Status!(4!January!2012),!Bloomberg!!!!!
<http://www.bloomberg.com/news/2012Z01Z04/patagoniaZroadZtestsZnewZsustainabilityZlegalZ
status.html>!
!
Westaway,!Kyle,!Sampselle,!Dirk,!‘The!Benefit!Corporation:!An!Economic!Analysis!with!
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Benefit corporations – a case study of the US

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