B- Corporations

My brother and I have this recurring conversation:

Me: Why can't corporations and businesses act more responsibly? Why can't they pay their CEOs less and their workers more? Why do they seek the cheapest off-shore or out-of-state labor, abandoning those places that require (or seek to require) better minimum wages, real environmental protection, corporate tax fairness, decent working conditions, and appropriate benefits?

Him: Because they'd be sued. Corporations have a fiduciary responsibility to maximize the profits of their shareholders. Period. End of story. Money - as measured in quarterly profits and dividends - is the premier arbiter of the corporations' and officers' performance.

Me: Okay. That is just wrong.

Him: Well, that's the way it is.

End of conversation.

But now, things are different, at least here in Maryland, due to recent state legislation that legalizes B-Corporations - Benefit Corporations. These are hybrid business/social concern entities that build the mantra, the mandate, of doing-good-by-doing-well into their operational definition.

In the words of Little Green Submarine:

"When a corporation incorporates in Maryland as a Benefit Corporation, their expressed social or environmental purpose must be written into its bylaws. The Benefit Corporations must create a material positive impact on society, consider how decisions affect employees, community and the environment, and publicly report their social and environmental performance using established third-party standards.

The law does not give priority to one stakeholder over another – in many states shareholders are considered the primary stakeholder and decisions are based predominately on what is in their best interest. This law considers equal stakeholders to include: shareholders, employees, suppliers, customers, community, and environment."

In other words, now, if a company incorporates as a B-Corporation, it can be sued if it does NOT bring material benefit to those designated stakeholders it seeks to assist. Making money will always be part of the equation. No one wins if businesses with good intentions fail. But B-Corporations proclaim that business should not only be about making money. It should also be about being a good citizen and contributing to social well-being.

It's about time. In this next round of sustainable activism, we will need business more than ever to take a leading role. Sustainability cannot come about by intentions and mindfulness alone. Nor can sustainable innovations and leadership be bounded by sector. Green-minded consumers need green products to purchase. And green-minded businesses need green consumers to support them.

But even more than this very practical contribution that B-Corporations make is this essential gift: B-Corporations will begin to change the narrative, the way we think, about the role of business in society today. This is the re-telling of an age-old concept of fairness and equity, mutual care and responsibility embedded in the way we do business that many of us have been waiting so very long to hear.

Hurray for Maryland for leading the way.