Hybrid Corporations Pursue Profit And Public Benefit

Published: 29 June 2011

5 pages, 1 figure

EXECUTIVE SUMMARY

This report provides an overview of benefit corporation legislation passed by state legislatures in four US states and being considered in seven others, promoted by B Lab, a US not-for-profit organization. Firms choosing to incorporate as benefit corporations must designate a public purpose: a material positive impact on society or the environment, as well as expand fiduciary duty in their governing documents and decision making. Benefit corporation law aims to formalize the environmental or social goals of a firm so that they persist regardless of new investors, management or ownership. It also demands accountability to shareholders on environmental and social performance, as it requires an independent director to assess progress towards the stated public purpose and report performance annually against a third-party standard. Benefit corporation status offers no protection against the competitive pressures exerted by larger firms without a social or environmental mission. For benefit corporations to prosper they require a customer base whose loyalty is strongly linked to the public benefit they deliver.

TABLE OF CONTENTS

HYBRID CORPORATIONS PURSUE PROFIT AND PUBLIC BENEFIT
Benefit Corporations Must Formalize Environmental Or Social Purpose
Legal Status Increases Confidence For Social Impact Investors
Benefit Corporations Must Educate Customers To Prosper

TABLE OF FIGURES

Figure 1. Benefit Corporation Law Supports Firms Seeking Profits And Public Benefits

ORGANIZATIONS MENTIONED

B Lab, BetterWorldBooks, Clean Currents, Clorox, Good Capital, Investors’ Circle, Kimberly-Clark, New Resource Bank, SC Johnson, Seventh Generation, Sungevity