New York has passed legislation to allow the formation of a new sort of corporation — a Benefit Corporation, or B Corp:
Kyle Westaway, New Legal Structures for ‘Social Entrepreneurs’
The Benefit Corporation is a new class of corporation with a corporate purpose to create public benefit, a broader fiduciary duty and is transparent about its overall social and environmental performance.
By definition, it must operate for the general public benefit – defined as a material positive impact on society and the environment. Every benefit corporation is required to publish an assessment using an independent, third-party assessment tool. To create a material positive benefit, a benefit corporation operates in a manner that not only creates value for the company’s shareholders, but also its community, environment, employees and suppliers.
The structure also calls for a high level of transparency and accountability. Within 120 days after the end of each fiscal year, a benefit corporation is required to publish a “Benefit Report,” which states how it performed that year on a social and environmental axis.
The press release, received by email:
NY Law Creates New Kind of Corporation
Spurs Investment to Create High Quality Jobs and
Use Business to Solve Social Problems
State Legislators from Wall Street Sponsored the Bill
Albany, NY: At midnight last night a law was enacted creating benefit corporations, a new class of corporations required to create benefit for society as well as shareholders. Unlike traditional corporations, benefit corporations are required to create a material positive impact on society and the environment; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards.
Continuing a national trend of strong bi-partisan support for benefit corporation legislation, the New York bill (S79-A and A4692-A), sponsored by Senators Daniel Squadron (D-25) and Assembly Speaker Sheldon Silver (D-64) and co-sponsored by William Larkin (R, C-39), passed both houses of the New York legislature unanimously.
“Political leaders like Speaker Silver, and Senators Squadron and Larkin understand that New York needs to attract businesses whose core purpose is to create more high quality jobs and to improve the quality of life in communities across the state,” said Andrew Kassoy, co founder of B Lab, the nonprofit organization that drafted the model legislation. “The benefit corporation bill will unlock billions of dollars in impact investment capital and enable entrepreneurs across the state to start businesses that solve some of society’s greatest challenges.”
“Benefit corporations will mean New York is open for business in an important new way. Benefit corporations will unlock billions of dollars in new investments in New York while empowering companies to do well and do good,” said Senator Squadron. “By offering this opportunity to entrepreneurs and investors, New York will bring new businesses into the state, new investors into the market and a new socially-minded approach for our entrepreneurs.”
“By bringing benefit corporations to New York, we are showing that profit and social responsibility are not mutually exclusive,” said Speaker Silver. “This law will continue our efforts to strengthen and diversify our economy while ensuring that New York remains a national leader in progressive policies that help our environment, protect consumers and bolster the rights of working men and women.”
“I am very happy to see that this bill has finally become law. It will enable businesses to grow without the infringement of state government, and will help New York become a more business friendly state,” added Senator Larkin.
The new law addresses a long time concern among entrepreneurs who need to raise growth capital but fear losing control of the social or environmental mission of their business. These entrepreneurs and other shareholders of benefit corporations now have additional rights to hold directors accountable for failure to create a material positive impact on society, to consider the impact of decisions on employees, community, and the environment, or to inform the public about the company’s overall social and environmental impact as assessed against a credible, independent third party standard.
New York is the seventh state to pass benefit corporation legislation, joining Maryland, Vermont, New Jersey, Virginia, Hawaii, and most recently, California. The legislation has enjoyed broad bi-partisan support nationally, with a vote tally of 892 ayes and 62 nays, and the signatures of both Republican and Democratic governors. The New York bill had significant support from business (partial list below), including Eileen Fisher, City Light Capital, and UncommonGoods; and from more than 2,600 New York citizens, all interested in creating better choices for the growing number of entrepreneurs and investors who seek to create businesses that create both social and shareholder value.
“The passage of benefit corporation legislation is an important and much needed step forward to grow our New York state economy and create more jobs which can also provide greater social and environmental benefit,” says David Levine, co-founder of the American Sustainable Business Council whose members’ organizations represent over 100,000 businesses. “At a time when the country is looking for solutions to build the economy, New York is helping to lead the way with an innovative and sustainable business strategy.”
I am going to be actively looking for B corps in New York, and finding out why their founders opted for that path.