Corporations with Conscience Launch in Massachusetts
Corporations with Conscience Launch in Massachusetts
Boston, December 3. The Great Hall of the Massachusetts Statehouse echoed with the Senator’s steady voice. Brian Joyce of Canton presided at a press conference honoring the first companies registering as Massachusetts benefit corporations. “It’s a terrific day for Massachusetts” Joyce announced “as we become an even more attractive place for companies to do business and create jobs”. In August the state had became the tenth to pass legislation enabling the new corporate class, one which allows companies to legally integrate commercial goals and social purpose. Growing numbers of advocates and experts believe that the innovative model has potential for reshaping American business practices.
The seven newly minted benefit companies include Cambridge-based Dimagi, Inc and Leap Organics, LLC as well as Dancing Bear Baking Company of Boston. Most are existing Massachusetts corporations changing status along with one converting from Delaware registration. Senator Joyce had guided the bill through the legislature while supportive firms pitched in with lobbying. He recounted that proposal was packaged as sub-chapter of a popular jobs bill to leapfrog the slow legislative process. The Senator emphasized that Governor Deval Patrick had backed the bill and marshaled support. Legislators representing Cambridge who added their support included Senator Sal DiDomenico and Representative Tim Toomey.
Benefit statutes have been adopted in twelve states since 2010, modifying prevailing U.S. corporate practice by absolving managers and boards from liability for decisions which may not maximize profits of stockholders. Without such protection sales of companies to buyers aligned with the seller’s social values rather than the highest bidder have been contested by shareholder lawsuits. Similarly, expenditures for employee or environmental safeguards can be challenged as detrimental to the bottom line. Benefit corporation by-laws call for a board member with responsibility for reporting on the company's compliance with social standards established by independent institutions. A widely accepted system created by the Global Impact Investment Rating System (GIIRS) includes financial transparency, reliable service to customers, concern for employees, protection of the environment and commitment to needs of the community. In New England Massachusetts and Vermont have adopted benefit legislation. Ten other American states include Maryland, Virginia, New Jersey, California, South Carolina, Hawaii, New York, Louisiana, Illinois and Pennsylvania. By late 2012 there are initiatives under way in 14 additional state jurisdictions.
Andrew Kassoy, president of B Lab addressed the press conference. Since 2007 Pennsylvania the non-profit has been a key promoter of benefit legislation. A service B Lab has offered to companies is certification as “B Corps.” Not to be confused with registration as legal benefit corporation, the “B Corp” endorsement is a seal of approval similar to Energy Star or LEEDS. Many firms have sought the B Corp status as validation of their social contributions and as a tool for public relations. Certification requires annual audits of compliance with GIIRS principles. By late 2012 nearly 650 U.S. companies have been recognized as B Corps, including familiar brands such as sports apparel maker Patagonia. By late 2012 Massachusetts had 18 certified B Corps. B Labs estimate 190 legal benefit corporations to have been registered in the U.S. since 2010.
Said Carter Powers, CEO of Dimagi, Inc. which designs information technology for health service delivery in urban and rural communities across the world: “our organization measures itself by the impact we have on improving health care. We are excited to see Massachusetts take such an important step. We look forward to furthering our work to integrate innovative technologies into global public and private services to improve human health and well-being.” Frank Carpetino, senior manager at Dancing Bear Baking Company specializing in all-natural baked and kosher products, added: ”since its inception our company realized the importance of being a leader for community, environmental and social matters. Registering as early adopter of the Massachusetts Benefit Corporation further reinforces our commitment...”
As with many new concepts the benefit corporation is not without detractors. Some companies prefer the clarity of either for-profit or nonprofit standing when marketing to their customer base. Others voice concern about impediments for placing equity or debt financing with conservative or poorly informed institutions. Standards for social goals which may not be uniformly defined is yet another issue.
Nonetheless, in 2012 the benefit movement is picking up support. Yale economist Robert Shiller included a favorable discussion his influential book Finance and the Good Society. In October The Clinton Global Initiative integrated the B Lab certification process into its South American projects. Former president Clinton has offered supportive remarks at several public forums. In Massachusetts farsighted political and business leaders have taken the initiative to join twelve states in a growing movement for re-balancing the values of business.