The New York Times recently published an article by Joe Nocera entitled "What is Business Waiting For?" Nocera argues for businesses' responsibility to address unemployment and hire more workers. He also references financial risk expert Marc Groz's proposal of a "contingent commitment facility." Using this facility, a company would agree to hire X number of new workers. However, the commitment would only become binding if other companies in the same industry agree to do likewise.
Mr. Groz' concept of a 'contingent commitment facility' seems an interesting idea, but it doesn't address the systemic problem: namely, that business needs to make "people a priority, not just earnings."
However, benefit corporation legislation, which is likely to be signed into law by Governor Cuomo in New York and Governor Brown in California in the next two weeks, has the potential to address this systemic problem and thereby create millions of high quality jobs that will improve the quality of life in communities across our country.
Benefit corporation legislation has already passed in five states and is moving forward in three others. It is also under review by the powers that be in Delaware, which is the de facto, if not de jure home of the American corporation.
Benefit corporations are a new kind of corporation -- completely voluntary -- that redefine the fiduciary duty of their directors so that they are required to consider the impact of their decisions, not only on their shareholders, but also on their workers, community, and the environment.
Especially in Delaware, as the recent eBay v. craigslist case affirmed, considering anything other than shareholder interest, even in the long-term, exposes directors to litigation.
More than 400 businesses from over 60 industries across the country -- from Midwestern industrial manufacturers like Cascade Engineering to New York insurance companies like Freelancers Insurance to California consumer products companies like Method -- have already amended their corporate governing documents to meet this higher standard of accountability and this law codifies their 400 one-off legal innovations into a distinct legally recognized corporate entity, making it easier for the next 400,000 entrepreneurs to build the next generation of corporations that will put business back into proper relation with society. And this isn't just about good governance -- more than half of the businesses in this community grew jobs by more than 5 percent during the Great Recession.
These benefit corporations also voluntarily agree to higher standards of transparency, publishing an annual benefit report on their overall social and environmental performance. This report must assess their performance against a credible third-party standard making sure that the general public and the investment community have the information they need to make more informed decisions.
I agree with Nocera that waiting for leadership from Washington is Waiting for Godot. The leaders we need to recognize and rally behind are the business leaders that are holding themselves to higher standards and creating high quality jobs.
Follow Jay Coen Gilbert on Twitter: www.twitter.com/@Bcorporation
"... a new kind of corporation -- completely voluntary -- that redefine the fiduciary duty of their directors so that they are required to consider the impact of their decisions, not only on their shareholders, but also on their workers, community, & the environment."
I went to grammar school in NY & we studied the Iroquois Nations, the above reminded me of the 'Seventh Generation' concept from "The Constitution of the Iroquois Nations."
I agree people living in the present are called upon to solve problems. We are also called upon to live sustainably & work toward the benefit of the seventh generation. It behooves us, or, at the least, it would be really really nice not to create new problems or to perpetuate existing problems for the next or seventh generation.
From 'The Great Binding Law'
"...In every deliberation, we must consider the impact on the seventh generation... even if it requires having skin as thick as the bark of a pine.
...In all of your deliberations in the Confederate Council, in your efforts at law making, in all your official acts, self interest shall be cast into oblivion.
...Look & listen for the welfare of the whole people & have always in view not only the present but also the coming generations, even those whose faces are yet beneath the surface of the ground – the unborn of the future Nation."
http://www.indigenouspeople.net/iroqcon.htm
More Profit = More Sustained Jobs = More Tax = Improved Societal Welfare
Less Profit = Less Sustained Jobs = Less Tax = Less Societal Welfare
That being said, I like the idea that directors do not have to worry about being sued for not always focusing on short-term financial returns only. And, of course shareholders are always allowed to do as they want, and if the return of capital and personnel is above market average, they can spend it how they want and give back. But a word of caution, what is competitive advantage and above-market returns today can quickly reverse and those companies that do not see shareholder return as the primary function of the company are opening themselves up to killing jobs.
Kai
Anyway, we are already living under fascism. When the corporations are in charge, when they literally write the laws (ALEC), that's fascism.
The moderators don’t know that we go way back and are old sparring partners who respect each other’s opinions so they read malice into comments that are just soft kidding.
You state, ‘Anyway, we are already living under fascism. When the corporatioÂns are in charge, when they literally write the laws (ALEC), that's fascism.’
a) Corporation are far from in charge. When they are prohibited from opening a factory in North Carolina, subjected to punitive regulations and taxes on a global scale, etc. it is clear to see that talking point does not hold up.
b) Corporation should be allowed to have a say in the regulatory and tax environment in which they operate. There is nothing at all wrong with that and in fact it should be encouraged as much as possible.
What you see is fascism is really socialism, with the American government moving from a small regulatory body that was an unbiased regulator of fair process for all and equally applied to all moving to the role of subjective distributor of fair outcome for some at the expense of others. At the far end of the socialist scale is fascism, when government takes on the role of managing the economy’s major factors of productions and the businesses that employ them. We are moving that way.
There is nothing wrong with ALEC, federalism is what our founding fathers advocated with the government not having the right to take and redistribute.
Kai
In the same way that it's important not to generalize about people, it's important not to generalize about business. It is especially important that you separate those businesses large enough to have political influence and those who do not.
Talk to you local small business owners and you will know that this is the case.