Delaware Legalizes Public Benefit Corporations
By Robyn Taylor Knapp
Legislation enabling the formation of Public Benefit Corporations in Delaware was signed into law yesterday, July 17, 2013. Delaware is the 16th state to legally embrace the Benefit Corp structure.
Delaware, as the home of most U.S. Corporate Law, is a big win for the B Corp movement. Over one million business entities, 50% of all public companies, and two-thirds of all Fortune 500 companies are incorporated in DE. In allowing a business structure where there is a legally binding public benefit requirement, Delaware may be the pebble in the pond that could eventually create a significant shift in corporate law.
“Delaware is rightfully recognized worldwide for its leading role in corporate law,” said Delaware Governor Jack Markell, during a press conference announcing Senate Bill 47 in April. “With the addition of Public Benefit Corporations, Delaware will continue to be a leader and support a new movement of social entrepreneurs and investors who are stepping forward to meet high standards of corporate purpose, accountability, and transparency.”
Benefit Corporations are the same as traditional corporations except for three main concepts: higher standards of purpose, transparency, and accountability. The B Corp structure requires businesses to exercise a triple bottom line, meaning they are accountable for creating profits and also for creating positive social and environmental impacts.
Benefit Corporations work to benefit all stakeholders—shareowners, employees, customers, suppliers, and the communities in which they operate. Both public and privately owned companies can elect to be Public Benefit Corporations.
Benefit Corps are able to legally create benefits to society and the environment without fear of retribution from shareholders. Normally, community engagement and charitable contributions by a for-profit corporation can put its officers and directors at risk of violating the obligation to maximize shareholder value. For companies that choose to be Public Benefit Corporations, this risk is removed.
First Affirmative Financial Network has been a proud certified B Corp for three years and was honored to have been involved in the legislative process that made Colorado the 15th state to adopt laws allowing Public Benefit Corporations.
Read Governor Markell's press release
Read B Lab's take, published by Forbes and Skoll World Forum—‘The Evolution of Capitalism’
Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: July 18, 2013