What’s A B Corporation?
There’s a handwritten list on my refrigerator. It’s hanging there from a magnet right next to the monthly family calendar and the report cards. My wife keeps a roster of corporations like Costco and Starbucks that follow ethical practices. These are the places we’re supposed to patronize. There’s also another list, over on the side, headlined by companies like Monsanto and Koch Industries that represent a different kind of corporation. Woe to the wayward family member who might drop a dollar or two on one of their products. I haven’t set foot in a Wal Mart in over 5 years and my wife would rather see me walking down the shoulder of an interstate with a gas can in my hand than fill up at an Exxon or BP station. It’s one way of making a statement about corporate practices.
There is a different way to assess corporate behavior. The “B” Corporation is a relatively new development in business management practices. The B stands for benefit. A corporation chartered as a Benefit Corporation has the ability to include activities designed to achieve social or environmental benefits as part of its core business operations. Don’t get me wrong, Benefit Corporations are still in existence to turn a profit. The difference is that the Benefit Corporation establishes societal benefits as one of its founding principles. The company exists, in part, to do good things. Additionally, by the rules of its establishment, the corporation is also bound to follow policies and practices ensuring accountability, transparency in its actions, standardized accounting methods and procedures for governance that are very different from the traditional corporate structure. A Benefit Corporation pledges to work towards its stated goals for the public good as a part of its basic operations and can be called to task by its shareholders should it fail to pursue that mission. 23 states and the District of Columbia currently authorize the creation of Benefit Corporations. Legislation is currently pending in an additional 14 states. Illinois has also introduced legislation that would permit the creation of a Benefit LLC for businesses where incorporation may not be appropriate.
Every time you spend money, you’re casting a vote for the kind of world you want.-Anna Lappe
Related to the creation of Benefit Corporations is a non-profit that has been established to evaluate corporate operations of these entities. B Lab provides an independent certification of Benefit Corporations that assesses their practices and methods and confers the status of “Certified B Corporation” on businesses that meet their requirements. Currently there are 1,040 certified B Corporations in 34 countries around the world representing 60 different industries. A Benefit Corporation does not need to be certified by B Lab, but the certification process provides a measurement tool that can provide a consumer with a presumably objective method of evaluating the standards and practices of a company. Much like LEED Certification, where a building doesn’t need to be certified to be energy-efficient, a Benefit Corporation need not be certified to be engaged in a public purpose. In both instances the certification process provides both the business and the public with a standardized method of evaluating performance. You can find out more about the certification process by visiting the B Lab website.
A New Way Of Doing Business?
The traditional corporation exists for one purpose-to make money. In fact, beyond that, a traditional corporation is committed to pursuing the maximum possible profits possible as part of its fiduciary duty to its shareholders. This corporate “greed” has resulted in all sorts of mayhem for the environment. Corporations in pursuit of maximum profits have engaged in a myriad of practices that have resulted in the destruction or degradation of natural resources. Corporations have a long and sordid history of environmental destruction in the U.S. and a resume’ that includes polluting the air and water, improper disposal of waste, evading regulation and influencing legislation to permit destructive practices all in pursuit of maximizing profits. The Benefit Corporation diverges from this model of corporate governance and creates the opportunity to utilize the methods usually used to create corporate wealth to accomplish goals, especially in the realm of environmental protection, that were heretofore difficult or impossible to achieve because of a lack of resources.
The traditional corporation is “constrained” by its fiduciary duties to shareholders to pursue profit and its own interests above all else. Social entrepreneurs and people looking for an outlet for socially conscious investing are hard pressed to match their goals with the established corporate structure. In fact, in a Benefit Corporation the directors have a fiduciary duty to pursue the established non-financial socially beneficial purposes of the corporation. The creation of Benefit Corporations allows access to all of the advantages of incorporation, or the investment in corporate stock, without the limitation of the obligation to pursue profit above all other goals. It is an interesting, and potentially powerful, hybrid of the role of non-profits and the capability of the for-profit business world focused on achieving social good. The possibility of bringing investment capital to the world of environmental protection has a great deal of promise.
Does It Matter?
There has been some debate regarding whether or not the creation of the Benefit Corporation form was necessary. The freedom to use the corporate form of doing business with its structure and protections, attract investors and pursue socially beneficial goals is reason enough. The possibility of unleashing the financial power of business to address major issues facing our society only emphasizes the advantages of enabling this form of incorporation. The fact that in addition to start-up social entrepreneurs, substantial businesses like Patagonia, Seventh Generation and Cabot Creamery have chosen to conduct their operations in accordance with the standards and practices required of a Benefit Corporation highlights both the possibilities and the efficacy of this way of doing business and the importance of growing the B Corporation community.
According to B Labs, certified B Corporations are more likely to not just be better corporate citizens, but engage in better employment practices. The certification process offers consumers the chance to make informed decisions on where they may want to spend their money. Perhaps most importantly, it offers a different approach to accepted methods and practices of commerce that has the potential to change the accepted norms of capitalism. For environmental advocates the possibilities are endless.
You’re welcome to stop by my house and pursue the lists of good and bad corporations on my refrigerator. They were carefully compiled after extensive research into the corporate practices of the companies that are on them. It’s probably a better idea to consult the folks at B Labs. Their objective standards not only provide a good measuring stick for companies, but they offer encouragement and reinforcement to companies that choose to include public good as part of their business mission. While the idea may be novel today, 10 years from now the benefit corporation may very well be a common way for investors, social entrepreneurs and consumers to use the power of capitalism to change the world.- Ben Spinelli
National Treasure For Sale
The New Jersey Palisades are a unique geologic formation along the New Jersey side of the Hudson River across from New York City. Sheer basalt cliffs that rise between 300 and 550 feet above the river, they stretch for nearly 20 miles. In 1983, the Palisades were listed as a National Natural Landmark, a designation that includes iconic places like Mount Shasta in California and Franconia Notch in New Hampshire. The natural beauty and the ecological value of the Palisades are protected by an interstate park that was created cooperatively by New York and New Jersey in 1900 pursuant to an agreement between the governor of New Jersey and the governor of New York-Theodore Roosevelt. Protection of the Palisades was visionary and a gift to future generations from people who understood the value of protecting a resource from degradation.
The Palisades Interstate Park was created to protect the cliffs from quarrying operations. Now the Palisades face a different threat. LG Electronics-the “Life is Good” people who manufacture cell phones and flat screen T.V.s wants to put its new North American headquarters in a 143 foot high office campus in Englewood Cliffs, NJ. The project will undoubtedly bring jobs and economic investment to New Jersey (as well as significant property tax revenue to Englewood Cliffs). The problem is that this proposed building will rise above the tree line and intrude upon the vista that has been protected since the creation of the park and acknowledged as a valuable resource with the designation of the Palisades as a National Landmark. The magnitude of the intrusion into a scenic view is, I suppose, in the eye of the beholder. The import of enabling a governing ethic that embraces squandering protected resources in exchange for questionable short-term gains is not debatable. It is a dangerous and ominous precedent.
Answering The Wrong Questions
There is a great scene in My Cousin Vinny where Vinny is discussing with his girlfriend just what he should wear to go deer hunting. The answer was both priceless and obvious as well as extremely relevant to answering the questions surrounding LG’s proposal. The people in Englewood Cliff are busy discussing how high the new LG headquarters should be or how it should be designed. The correct answer is, who cares! It does not belong there. The arguments over how this building should look or how high it should be are seriously misplaced. It highlights how the battle for local tax revenue leads local officials to become deranged. Instead of asking the basic question-is this the right place for this building-the conversation centers on rationalization and justification to find a way to accommodate a project that was ill-conceived from the start. Most alarmingly, this debate is over how to convey benefits to a small group of people at the expense of compromising something of acknowledged national significance.
It seems to me that the General has his headquarters where his hindquarters ought to be-Abraham Lincoln
There are real questions that need to be asked here. Are there no alternatives? Is the tax revenue to one town more valuable than the integrity of a national landmark? Has anyone involved in the project heard the news that suburban office campuses are a dying non-sustainable model of development? Do we have the political will to insist that economic development take place in an environmentally sustainable manner? Are we capable of viewing investment and development in a more regional fashion and end the destructive competition between communities? Why bring these jobs to a site that is not served by mass transit? Isn’t there a better way to meet LG’s needs, provide jobs and encourage investment in New Jersey without the environmental destruction?
The answer to the last question is easy. While the effort to pound a square peg into a round hole goes on in Englewood Cliffs, 18 miles away Newark, the state’s largest city, sits looking for economic investment. The City has all of the necessary infrastructure in place to support a large corporate headquarters. Its located at the hub of a network of highways. Newark is served by commuter and regional railroads, an international airport, an international seaport and is home to the acclaimed New Jersey Institute of Technology. NJIT’s high-tech campus attracts students and research professors from all over the world. Midtown Manhattan is a 15 minute train ride away. These are all assets that a technology company like LG just might be interested in. They could build their building however high they need it to be-without the need to compromise a national landmark. Yet, for whatever reason, locating this building in a far more appropriate place has never entered the conversation. Municipal and state officials are doing contortions to find a way to enable construction of a new building with absolutely no access to mass transit and that will duplicate countless existing empty corporate campuses that dot (or plague) the suburban landscape. Instead the debate centers on just how much the new headquarters will affect a national treasure. It’s an insane conversation driven by municipal finances. It’s hard to understand why.
If I Ask You To Jump….
Towns will sell their souls for the short buck. Englewood Cliffs is willing to hand the keys to the city to LG to keep them in town along with their tax revenues. They are willing to make a decision that will impact millions of people, affect multiple generations and unravel over a century of conservation policy to protect their parochial interests. Faced with push back, the mayor of Englewood Cliffs stated, “Time is of the essence! I fear if a fair compromise is not reached, LG will leave the state.” This line of reasoning would be laughable if it weren’t so destructive and ridiculous. LG will no doubt complain that the state is unfriendly to business and cite the obstacles to their plans-as if an ill-planned poorly located project was not itself an obstacle-as evidence of a hostile regulatory scheme. Never mind that there are perfectly reasonable and preferable alternatives that would meet their needs. Corporations have only one goal-maximizing their profits-and if they can co-opt a community into assisting with that effort; all the better. Meanwhile local governments will continue to perform tricks in an effort to out compete their neighbors and to please corporations with their promises of dubious rewards.
Protection of the environment and economic development are not mutually exclusive goals. Jobs and economic growth are laudable and necessary aims. However, they do not trump protecting the environment. Finding ways to accommodate and enable investment in a manner, and in places, that minimize environmental impact and encourage sustainable outcomes is achievable. The saga of LG and Englewood Cliffs has a great deal of significance that goes beyond just this incident. Hydraulic fracturing, offshore oil drilling, and real estate deals all over the country pit the public interest against the quests of private and corporate interests to garner benefits, concessions and incentives on a daily basis. The ability of corporations to manipulate outcomes because local officials are susceptible to spurious arguments of economic gain and a reliance on the old rateable chase continues to lead us down an unsustainable path. Maybe it won’t be all that obvious today, but when the time comes that LG cuts a better deal somewhere else and the people of Englewood Cliffs are stuck with an empty office building in a bad location, it might just sink in.
So to the folks fighting the LG project-keep it up! If the mayor is talking compromise and LG is threatening to go elsewhere you must be making some headway. The issues in play here are important beyond Englewood Cliffs or the Palisades. Somewhere there’s a town offering a tax break or a state waiving an environmental regulation for a Super Wal-Mart at the highway exit or a new football stadium for a team that’s threatening to leave town. Somewhere somebody is willing to trade public trust assets for short-term gain. Every time it happens public officials need to be called out. Your efforts might stop the LG project, but more importantly, they might serve as an example to people elsewhere that the fight is worthwhile. Somewhere along the line this way of doing business has to stop and right now is as good a time as any. – Ben Spinelli