Benefit Corporations In Corporate Law? – Linkilaw

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A corporation is by definition a company that is legally authorised to act as a single entity, and whose sole purpose, in most of the cases, is to provide maximum return for its shareholders. It is no secret that the vast majority of corporations are driven by the desire to earn as much of the almighty dollar as possible, and often so despite the enormous toll it takes on its surroundings.

Luckily, the stiff and rigid corporate landscape is slowly, but undeniably changing. New players are in town, and they are here to change it for the better. These are called benefit corporations.

What is a benefit corporation?

If “benefit corporation” sounds like a contradiction in terms to you, you are not alone. Publicly benefit/societal goods AND profit – and not despite of it? Indeed, a benefit corporation is defined as “a new legal entity for mission driven businesses that provides a higher level of legal protection, accountability, and transparency than existing for-profit entities.” (source)

So how does a benefit corporation fit into this profit-driven, dog-eat-dog corporate world? How do corporations pursue their mission and not bleed money at the same time, especially taking into consideration that the conventional legal framework has been known to put a damper on sustainable and mission-driven business enterprises?

The key is in the fact that the status of a benefit corporation allows such entities a higher legal protection, so they can pursue their missions more freely and efficiently.

 

What’s in it for the company?

It’s a simple equation: The corporation commits to fulfilling certain societal goods, and in exchange enjoys various types of legal protection, bidding protection and/or tax benefits. At the price of increased accountability, the firm is allowed to prioritise other goals than just earning money, like balancing financial and non-financial interests. Data also suggests such companies are more attractive to buyers, clients, and investors; as well as that they manage to attract (and retain!) talent more easily. As Yvon Chouinard, CEO of the clothing company Patagonia, puts it: “Benefit corporation legislation creates the legal framework to enable mission-driven companies to stay mission-driven.”

 

Consider the case of the ice cream company Ben & Jerry’s versus. the multinational conglomerate Unilever. Nurturing the image of a socially responsible company that worked only with organic and fair-trade farmers, Ben & Jerry’s owners at first resisted the highest bidding of the Anglo-Dutch food giant when their company went public in 2000. Eventually, they were legally obliged to accept Unilever’s offer as they had to ensure the highest possible return for Ben & Jerry’s shareholders, reports Mashable. Had Ben & Jerry’s been registered as a benefit corporation at the time, the owners would have had the right to claim the perks of the company’s protected status, and sell it to someone they thought would do their company mission more justice.

 

What’s in it for the rest of the world?

Many argue about the sustainability of the concept of a benefit corporation: Pursuing profit or a mission is challenging enough, let alone both at once. However, others see the distinctive value of purpose-driven enterprises even in today’s tough times: According to them, the capitalist system that is nowadays in place will simply no longer do. “The problem of technological innovation is not the primary problem that we still need to solve. The primary problems are the very large-scale problems: giving people access to good education, quality health care, poverty alleviation and not destroying our planet,” as tech venture capitalist Albert Wenger said to The Guardian. Therefore, social innovations will have an increasingly important role in building a tomorrow that we will be able to sustain. Many believe benefit corporations are going to be an important piece in that puzzle.

Only time will tell if they are right.

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