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.
Vermont open to benefit corporations | Burlington Free Press ...
The Rise of Benefit Corporations | The Nation
Four States Allow Benefit Corporations - Business News - Portfolio.com
What's a benefit corporation? And why should you shop there? | Grist
I agree with you that all businesses HAVE a purpose beyond (and including) that of making a profit. I recently began writing a series of blog posts entitled It's Just Good Business addressing this and related topics. http://www.workingforgood.com/category/blog
The Conscious Capitalism web site - http://www.consciouscapitalism.org - is another good source for related information and insights.
Best,
Jeff
Federal, state, county, municipal, school district and other various government taxing authorities CONSUME (or destroy) WEALTH that was created by the GREEDY private sector.
If Federal Government deficit spending destroys the US economy and the WEALTH CREATING businesses, including the GREEDY corporations, then all of those government jobs, government services and other government programs at every level will disappear for lack of funding from the GREEDY private sector.
Excellent! I am glad you used the word stakeholders, which is a much larger set than just the shareholders. I repeated fallacy among capitalist extremists is that the corporation only reason to exist is for profits to the shareholders, a much smaller subset of all stakeholders.
Corporations need to fulfill their civic duty and pay their fair share of taxes without complaint.
We are sick and tired of their whining about paying taxes, and actively avoiding paying taxes with legal gimmicks, shirking their responsibility.
To add insult to injury, the corporations try to claim "corporate personhood" with their attempted takeover of our government. The American people will never succumb to fascism!
In the meantime, there are a growing number of publicly-traded companies around the world that are very exciting and are blazing new trails in social, environmental, and governance policies that demonstrate the business case for sustainability. These businesses are profitable because they are sustainable, rather than engaging in sustainability because the are profitable. The former is truly sustainable and the latter is partaking in the "flavor of the month."
a shovel in its corporate nonexistent hand. So what you must mean is that -people-
will be drafted into this involuntary volunteer army by their employers. Sweet.
I do not think that I ever heard that any business or corporation exists for any reason except for that business to (try to) make a profit for themselves, the business owners, or corporation stockholders.
Why would or should any individual, business, partnership, or corporation ever do anything (like hiring another employee) that did not profit that business entity? This profit is the only reason why any businessman ever does anything!
Does any laborer ever work without compensation?
Why would or should anybody ever do anything without compensation?
Profits and wages are the only things that motivate people to work!
I have never worked for any reason except to be compensated (paid) in return for my labor.
I only pursued higher education in order to increase my compensation for my labor.
Who would pay the employees of some "B-Corp"? The taxpayers? Who?
Where did anyone ever get that idea?
Call Microsoft for help and you get an IT person in Mumbai, India.
American compamies are enriching other countries economies at the cost of the American economy.
Children have been found in factories making rugs, women have been locked in buildings making clothes without pay for export.
Meanwhile the American business owners and stockholders are getting richer.
There is only color for the American businessman/corporation Green, the color of money.