In most states, a public stock corporation is obligated to pursue profits before anything else. If the officers and directors of the corporation fail to do so, they may be liable to shareholders for not acting in their best interest.
This presents a problem for firms who want to donate all the net profit to charity. Enter the Benefit Corporation. This relatively new business entity allows the directors and officers to consider social, environmental or community purpose as their primary goal. This helps shield a benefit corporation from shareholders lawsuits when the B-Corp pursues something other than profits.
Certifying and Legislating B-Corps
B Lab, a Philadelphia based nonprofit, offers a certification to businesses who meet certain standards, similar to LEED, Organic Agriculture, or Fair Trade Coffee. This new business entity is perfect for investors who want to do social good but also make money.
Legislators in Virginia, California, Hawaii, Maryland, New Jersey and Vermont have modified their constitution to allow this business formation over the past two years. Michigan, New York, and Pennsylvania are also working on laws approving the structure.
B-Corps in Louisiana
I just learned about the Benefit Corporation, so I’m not sure when or if it’s coming to Louisiana. Given all the stories I’ve been reading about social entrepreneurship in New Orleans, I’m sure it could be very useful.
Check out this TED talk delivered by the founder of B Lab for more details: