Within 120 days after the end of each fiscal year, a Benefit Corporation is required to publish a Benefit Report, which states how the Benefit Corporation performed that year on a social and environmental axis.The Benefit Corporation is held to a third party’s independent assessment that measures social and environmental impact. The Benefit Corporation has to then share this assessment of its performance publicly, which increases transparency and accountability.The benefits for shareholders are that they can now invest in companies that are serious about running in a sustainable manner.
If a corporation takes other stakeholders into account in its decision making — such the environment, community, employees or suppliers — and that adversely affects the profits of the corporation, the shareholders may file a lawsuit against the directors of the corporation for failing to maximize shareholder value.
Obviously, this poses a huge problem for socially and environmentally responsible corporations.
I think the best analogy is, if you’re going to be naked, you’d better be buff.
Kyle Westaway is an attorney and social entrepreneur.
The Benefit Corporation is a new class of corporation that allows companies to pursue profit as well as a strong social and environmental mission.
Under current corporate law, a company’s sole mandate is to maximize shareholder value — make as much profit as possible –for its shareholders.The FPC must clearly state its specific purpose, outline goals to achieve that purpose, and publish an annual report disclosing how well it has achieved that purpose.The premise is that clearly stating the positive purpose of the company and being transparent in an annual report will create better business.You should use either of these new forms if you are serious about operating a sustainable business, and if you are comfortable enough to allow the public to see how well you are performing.If you just want to greenwash your business, or want to look socially conscious without actually changing your core business model, then these new classes of corporations will just make you look ridiculous.By removing mandating stakeholder primacy and increasing transparency and accountability, directors are freed up to use the market as a force for good without risking suit from their shareholders.