Last week Governor Cuomo signed legislation making the creation of social corporations legal in the state. What does this mean? It means that no longer is the sole mission of a corporation to protect the owners and make a profit for shareholders, but adds some other requirements to the overall mission.
1. Meet comprehensive and transparent social and environmental performance standards;
2. Meet higher legal accountability standards;
3. Build business constituency for public policies that support sustainable business.
For those who think business is over-regulated, this might just be the solution. It puts the responsibility on the corporate leadership to do the right thing. B corporations have made a choice and are putting their money where their PR departments would normally be. No longer can you just put out some advertising saying you are “green” or that your workers (or as PR likes to call them “team members”) love you. You have to prove it.
One question that’s been asked, and it’s a good one, is what financial benefit does the company get for becoming a B Corp? Is there a tax break? As far as I know, and I may be wrong about this, there is none. It’s purely a social and ethical benefit. It’s earning your good will from the employees, the community and the people the company serves. It’s a strong faith that people are ultimately good and that they will make the right choice if it’s offered to them. If they trust you, trust your products/services and trust your mission, they will support you and you will prosper.
In the non-B-Corp world, the board of directors and corporate executives have a legal fiduciary duty to make the biggest profit they can for the shareholders. This is a recipe for corruption, shortcuts, downsizing, cutting benefits, risky behavior and even reduction of quality to meet those goals. In many ways, the old corporate structure actually encourages it. Make what as much as you can, as fast as you can and get out. Of course that is a bit of an exaggeration, but the foundation is there to take the path of least resistance.
In the B corp, the bar is set significantly higher. You not only have to meet your fiduciary duties to make a profit, but you must remain conscious of the social costs of your decisions. Does my decision put the community at risk? Does it harm the environment? Are my employees going to be unduly hurt by this decision?
This is not an easy goal to meet, but there are many companies already following the standards. It will take truly exceptional leaders to get there and leaders who are there not only to earn a golden parachute, but to change the way the world works.
Let’s see where this goes and if you think it’s a good idea, or a bad idea, share your thoughts.
Here is a random sampling of some B Corps. As you can see, most of them are small businesses and they have a wide range of products and services. Find one in your community and go talk with them to find out more about why they made this decision.
Eleek (makers of home decor and finishing products)
Arnold Development Group (real estate)
Southern Energy Management (commercial and residential energy planning and implementation)
Well Care Strategies (healthcare efficiency and quality software)