THE BLOG
07/29/2011 12:32 pm ET | Updated Jun 11, 2013

All Businesses Should Have a Public Purpose, Not Just 'B-Corps'

The latest rage in socially responsible business is the Benefit Corporation. "B-Corps" have charters and protocols that make clear the intention to achieve "profits -- plus"-- i.e., a financial return, plus a social or environmental return.

Frankly, I don't get it.

Five states have already set up a parallel charter -- Maryland, Vermont, New Jersey, Virginia and Hawaii now allow "Benefit Corporations." A New York statute is awaiting Governor Cuomo's signature and other states are taking it up as I write. California has two competing bills in the hopper: the Benefit Corporation legislation is going head to head with something called the Flexible Purpose Corp.

No harm done? Perhaps; time will tell. But the logic for the change is weak and the message confusing.

Advocates of B-Corps believe, as I do, that we need to enlist the capacity and problem-solving skills of business to make progress on the big challenges of our day. I understand why foundations and NGOs find the idea of business locked in to a social purpose attractive -- after all, the last decade is rife with examples of business excess, and trust in business is at a new low. It seems we need some new answers.

But I don't think the answer is a parallel process in some alternative universe. A distinct charter for the companies who think systematically about the social and environmental impacts of their decisions sends the wrong message. We need all businesses to operate that way. Nothing less will do.

In business schools we need to spend more time on case examples of businesses that have succeeded in accessing capital in public markets, but are managed with common sense values, decision rules and protocols up and down the supply chain and in relation to consumers. It will not always be a pretty picture, but it is a failure if MBAs learn that they need to set up a specially chartered organization to bring their values to work. There is too much important work to do in the large, complex, globe trotting, resource dependent multinational firms that produce the essential goods and services on which we are dependent.

The good news is there are tons of examples to work with -- consumer-facing brands like Whole Foods, Starbucks, Herman Miller and Southwest come to mind; but there is also value in teaching about the complex tradeoffs of enterprises in energy- and resource-dependent industrial behemoths such as GE, Caterpillar and Dow.

Publically minded corporations are not a new idea; from the earliest days of the Republic, businesses were chartered and offered limited liability for public purposes -- from establishing commerce in new colonies to building the railroads. Admittedly, it doesn't feel like that today; Milton Friedman's (failed) ideology about profit maximization still commands many boardrooms and classrooms.

However, in the hyper-connected world we inhabit, a company cannot survive for very long that ignores the demands of employees, investors, communities and aware consumers. From Nike to Walmart -- there are abundant examples of companies that learned this lesson the hard way. Ask any business leader if they can ignore factors like employee morale and retention, government/community franchises and license to operate, supplier demands and customer preferences.

Making fine distinctions between good companies and bad ones is a slippery slope. It certainly won't work to embed it in law. Companies are complex. The balancing act can be a difficult one.

Measurement systems are blunt. More attention needs to be paid to three central questions across all business organizations: What is the central mission or purpose of the enterprise? How do we measure success, and over what time frame? Who do we need to consult to make high quality decisions that stand the test of time?

Chances are that a company answering those questions thoughtfully, with the interests of all stakeholders in mind, will end up serving the public well, and be profitable.