August 12, 2010

New Benefit Corporation Legislation in Maryland & Vermont

This is a very interesting and encouraging trend:
"Maryland Governor Martin O'Malley signed into law the nation's first legislation creating Benefit Corporations, a new class of corporations required to create benefit for society as well as shareholders.

Unlike traditional corporations, Benefit Corporations must by law create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards....

The new law addresses a long time concern among entrepreneurs who need to raise growth capital but fear losing control of the social or environmental mission of their business. These entrepreneurs and other shareholders of Benefit Corporations now have additional rights to hold directors accountable for failure to create a material positive impact on society or to consider the impact of decisions on employees, community, and the environment."

The idea here is to write in ethics and CSR into the core mission of a startup, so that as capital is raised, say, via public share offerings, the mission of the company won't get diluted by a promissory shareholder obligation to seek profit first and foremost. This is the reason many companies stay private, or even return to private control as did Seventh Generation.

It will be interesting to see the extent to which Benefit Corp status will tend to attract or detract investors. My guess is that with social responsibility growing as rapidly as it is, it will be more a positive than a negative.

Other states considering the legislation include Colorado, New York, North Carolina, Oregon, Pennsylvania, and Washington.

2 comments:

  1. I agree with u, very informative post. Thanks for sharing it, its so clear and interesting.
    Regards,

    ReplyDelete