For almost three months now, the Occupy Wall Street movement has worked to open America's eyes to the corporate greed and corruption that are running our country into the ground.
The truth is that corporations can't help but act this way.
No matter how much they claim to care about their customers or the community, publicly traded corporations are legally obligated to maximize returns to investors, often at the expense of other important social and environmental goals.
Unfortunately, Wall Street has taken this legal obligation to an entirely new level by using its clout to influence public policy that not only benefits its bottom line, but disadvantages the rest of us in the process. This tenent of incorporation has meant that, once it grows big enough, a successful company will eventually have to stop thinking about its mission statement to focus on its bank statement.
But that's starting to change.
At midnight on Tuesday, the state of New York passed a law that created a new kind of legal corporation–the benefit corporation, or B Corp.
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.
The B corp structure gives managers the flexibility to do good and do well without threat of an investor suit when a decision is bad for profits in the short term.
Continuing a national trend of strong bi-partisan support for benefit corporation legislation, the bill passed both houses of the New York legislature unanimously.
“By bringing benefit corporations to New York, we are showing that profit and social responsibility are not mutually exclusive,” said Assembly Speaker Sheldon Silver (D-64). “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.”
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.
“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.”
New York is the seventh state to pass benefit corporation legislation, joining Maryland, Vermont, New Jersey, Virginia, Hawaii, and most recently, California.
Learn more about B Corps at the Benefit Corp. Information Site.