Ed Driscoll

The Sting

Over at my wife’s business law blog, she looks at something called “B Corporations“:

A colleague brought the concept of B Corporations to my attention. For those of you not wanting to follow the link, the idea is that corporations should benefit all “stakeholders” and actually society as a whole, not merely shareholders. And a company has been formed to not only provide road maps to being a being a better company, but also to test and approve companies with the B corporation stamp of approval.

Personally, and in the words of some teenager somewhere, this just creeps me out.

I think it’s great for corporations to both make money for their shareholders AND contribute to a better society.

But I’m always a little concerned about a small (7 person) group deciding who’s creating “benefit for all” and who isn’t. I don’t think creating benefit is something that can be objectively tested, nor should it be. And without seeing all of the testing criteria for becoming an official B Corporation, I can only guess that the founders ideas of societal benefit are going to flavor the testing criteria.

For example, nuclear power is not terribly PC among certain groups. But it could also be argued that in this day and age, it should be re-visited as a concept. Would a start up devoted to developing small, localized nuclear plants to municipalities pass the B Corporation test? As I said, i don’t know, I haven’t seen the test. But somehow I’m not sure it would.

Another example pops up on the B Corporation website. They offer a legal road map to becoming a B Corporation. You simply enter your type of entity and your state. I entered C Corporation and California.

I was told I should reincorporate in another state and amazingly enough their attorney will graciously help do so.

Here’s what the busy little Bs say:

Your state of incorporation is among 20 states that do NOT currently have corporate statutes that explicitly allow Directors to consider the interests of Stakeholders. A team of attorneys is currently in the process of evaluating case law to determine if there are specific rulings that would support the consideration of the interests of Stakeholders by Directors.

For many prospective B Corporations, reincorporating in a state offering greater protection for B Corporations will be the best option to maximize enforceability. Though more involved than simply amending your articles, reincorporating is also a relatively straight-forward process.

The reincorporation process includes forming a “New” corporation in a stakeholder friendly state, and merging the “Old” corporation into the “New” corporation.

For further information on the status of your state, please contact us at [email protected] or call us at xxx-xxx-xxxx. Our attorney will be happy to speak with you.

What they don’t say is that California does not DISALLOW statements of societal benefit. Furthermore, Articles of Incorporation are easily changed, so to say that putting the benefit to stakeholders in the articles ensures that the goals will survive is just incorrect.

Corporations can be encouraged to “do good” without an elitist screening panel. And people, I believe, should make their own decisions as to what sort of doing good they want to support. There are also various ways to “do good” and any group that specifies a corporation: “must amend their corporate governing documents” [emphasis added] is not talking about doing good, but doing good their way.

Hey, it takes a village to bring you the audacity of hope and change.