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.
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