A new type of corporation is cropping up around the country. A blend of for-profit and not-for-profit, Benefit or “B” corporations engage in charity and money making. They pledge to look out for the best interests of not only their shareholders but of all stakeholders: employees, consumers, and the greater community.
While traditional corporations have a legal responsibility to maximize profits, B corporations are free to focus on other pursuits, like preserving the environment, improving human health, or promoting the arts.
B corporations currently don’t exist in North Carolina. A bill allowing them passed unanimously in the Senate in March and is pending in the House. North Carolina would be the seventh state to give them a special designation in the law; California recently became the sixth.
Bill sponsor Sen. Richard Stevens, R-Wake, said there are several companies in North Carolina interested in converting into B corporations. They include Burt’s Bees, a natural skincare company in Durham, iContact, a software company in Raleigh, and Larry’s Beans, an organic coffee roaster in Raleigh.
“If [B corporations are] not allowed, they can always incorporate in another state,” Stevens said.
The “B corporation” title can be used as a marketing tool, similar to the Fair Trade label on coffee. It sends a signal to consumers that the company has been held to certain social and environmental standards.
In addition to general standards all B corporations must meet, the shareholders must agree on a specific public purpose for the corporation, whether it’s cleaning up a polluted river, providing economic opportunity for people in need, or improving the appearance of the community. If the directors of the corporation don’t achieve the agreed upon goal, shareholders can sue them.
Roy Cordato, vice president for research at the John Locke Foundation, said a corporation should be allowed to pursue any goal it wants. “Ultimately it has to answer to shareholders either way.”
But, he said, “the best way for a corporation to make a positive social impact is to increase profits,” he said.
When a company is profitable, Cordato says, it’s providing a product consumers want, providing jobs people need and increasing prosperity in general. When people are prosperous they are free to get involved in any social cause they wish to.
Stevens agreed that a company’s desire to maximize profits, in and of itself, was beneficial to society.
“But I don’t have any problem if, in addition to that, a group of people want to go beyond that and do more specific, targeted types of things they believe in,” he said. “It’s not mandatory, it’s optional. People should be allowed to do whatever they want with their own business.”
Sara Burrows is an associate editor of Carolina Journal.