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View Diary: The Start of a Revolution (126 comments)

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  •  There are differences... (7+ / 0-)

    I'm trying to figure this out, too, since I first saw an announcement about this yesterday. I still have stuff to review here (my job involves this stuff), but I followed Sven's links and found this:

    Why would a company want to become a benefit corporation?

    * Provide clarity to its directors and officers that their fiduciary duty includes creation of public benefit and consideration of non-financial interests, even in liquidity/sale scenarios;

    * Offer legal protection to its directors and officers to consider the interests of its workforce, its community, and the environment when making decisions, even in liquidity/sale scenarios;

    * Help maintain the company’s mission over time by 1) expanding shareholder rights to enforce this expanded definition of fiduciary duty and standard of consideration; and 2) requiring a 2/3 super-majority vote of shareholders to remove these higher standards; and 3) providing the opportunity to name and enforce pursuit of one or more specific public benefit purposes;

    * Differentiate the company in a confusing marketplace in which everyone is claiming to be a responsible or green business;

    * Demonstrate leadership by voluntarily electing to hold itself accountable to higher standards of corporate purpose, accountability, and transparency.

    Basically, in requiring that social and environmental considerations be weighed in addition to financial considerations when making decisions, the law is setting a different standard of responsibility for officers and directors than is normally imposed on officers and directors of non-B corporations.

    501(c)(3) corporations have different rules to follow. For one thing, they're nonprofit; B corps are not. Section 501(c)(3) is found in the Internal Revenue Code, and the consequence of not following those rules is the loss of your tax exemption. It's really a different set of considerations than the fiduciary duties of management to the corporation.

    •  thanks for doing the research where4art (2+ / 0-)
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      NWTerriD, Glen The Plumber

      I'm not a legal expert, so I'm still trying to figure out some of the nuts and bolts behind this. You're right, 501(c)(3)s are a whole different ball game. While in some cases filing as a non-profit may be an alternative, a lot of areas would be impossible to file as non-profit. I'm thinking things like commerce or trade. Basically, as soon as you sell something you're moving out of the realm of non-profit qualification. That's where the Benefit Corps designation comes in really handy. You can still engage in commerce, but as in the case of several companies whose reps I talked to, designate 50% of your profits to charitable causes, just as an example.

      Also, Benefit Corps designation is also great for existing corporations who are running under the strict profit-making rules of LLC or C Corp but want to change the way they do business. They couldn't just file for 501(c)(3), but filing for Benefit Corps status gives them a chance to run their business with more than just profit in mind. Instead of being legally required to only look at the bottom line they can be legally required to operate under a triple bottom line.

      •  Corps aren't legally required to only look at the (4+ / 0-)

        bottom line; they're legally required to hew to the articles of incorporation that set up the corp.  If the articles of incorporation are silent, then we assume that the corp is there to maximize profit.  I don't see any reason why a regular corp couldn't amend its articles of incorporation in order to interpolate other bottom lines (enviro, labor, etc)

        •  Right! From a quick look at the law, I think (1+ / 0-)
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          that's just what Yvon Chouinard did in Sacramento yesterday: file an amendment to the purpose clause in Patagonia's Articles of Incorporation to include the key phrase "This corporation is a benefit corporation." That language is the indicator that the corporation is governed by the Benefit Corporation provisions (Section 14600 et. seq.) of the California Corporations Code.

          The procedure's just like forming a close corporation. Once the required language is in the Articles, the corporation's governed by the General Corporation Law, except to the extent that the Benefit Corporation provisions conflict.

          Before this new law was enacted, a California corporation did not have the option of governing itself in the manner provided by the Benefit Corporation rules, which (among other things) establish a very different standard of fiduciary duty for the officers and directors—one that incorporates much more of the big picture than the existing standard centered on financial considerations.

          In the dull, dry world of corporate law, this is quite a paradigm shift!

        •  Yes, but without Benefit Corp status (1+ / 0-)
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          there wouldn't be any kind of third party standards to be legally held accountable by. A corporation could add that language simply to greenwash.

    •  in political races that would be great: Tony Stri (2+ / 0-)
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      citisven, Glen The Plumber

      Striclkand campaigned as a green businessman, pretty fraudulant IMO. and he won against a real progressive dem. Now he wants Galleghly's seat in the House, G retired...again.

      * Differentiate the company in a confusing marketplace in which everyone is claiming to be a responsible or green business;

      So we can expect more pandewring and exploitation of 'Green' this and that....

      good synopsis Where.

      Forwarding this diary to a CFO/CEO I know....

      ..squinting all the while in the glare of a culture that radiates ultraviolet consumerism and infrared celebrity...Russell Brand

      by KenBee on Wed Jan 11, 2012 at 10:41:48 PM PST

      [ Parent ]

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