As business activity in the third quarter of 2013 starts to gain momentum, the volume on the quiet evolution of the business corporation as an explicit force for creating public benefits is ramping up as well.
On August 1, the U.S. State of Delaware brought into a force a new law that permits for-profit enterprises to set out, in their articles of incorporation, business purposes that seek to deliver outcomes that serve the public interest beyond financial profit for shareholders.
On that day, 17 companies filed articles to incorporate as “Public Benefit Corporations” (PBCs) under Delaware’s General Corporation Law.
Eighteen other U.S. states have had public/community benefit/contribution/interest legislation on their books since before August 1, 2013. British Columbia added legislation effective July 31, 2013. Nova Scotia’s Community Interest Companies Act received Royal Assent last December 6 but is not yet in force.
The Delaware legislation, however, is especially notable because Delaware has more active public companies registered under its jurisdiction than any other jurisdiction in the world. In other words, the big boys are getting into the act.
The Delaware statute describes a PBC as a for-profit corporation that is intended to produce a positive effect (or a reduction of negative effects) on one or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders), and to operate in a responsible and sustainable manner.
It states that a PBC “shall be managed in a manner that balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incorporation.” In that certificate, the PBC “shall (i) identify …one or more specific public benefits to be promoted by the corporation, and (ii) state within its heading that it is a public benefit corporation.”
I advised Toronto-based Ian Martin Group on the August 1 creation of Ian Martin PBC (previously known as Ian Martin Inc, a Delaware company). The company is a human resources consultant in contract engineering, information technology and technical personnel. Its articles of incorporation, amended so it could become a PBC under Delaware law, now state that it “shall have a specific public benefit purpose of creating a material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard from the business and operations of the corporation.”
There are many for-profit companies that operate in a responsible and sustainable manner. There are many individuals who have made their fortunes in for-profit companies and who have become champions of linking business and doing good.
However, it is an ad hoc process and the benefit corporation proponents hope that such new corporate forms as PBCs will be an evolutionary step in enabling for-profit companies to embed corporate social responsibility and sustainability in their corporate DNA.
Please click here for a wide-ranging description and discussion of PBCs and the variety of other new hybrid corporate forms that focus more explicitly on the public interest, the forces that are giving rise to these corporations, and what the future may hold.