Benefit corporations let directors weigh community and planet alongside profit
Since a 1919 court case involving Ford, American corporate law has leaned toward one aim: maximise returns for shareholders. Directors who put social goals first could face lawsuits. Maryland offered an escape route in April 2010 with the first law creating benefit corporations, companies legally allowed to chase more than profit.
The principle of shareholder primacy was first spelled out in Dodge v. Ford Motor Co. and reaffirmed in Delaware in a 2010 Chancery Court case brought by eBay against Craig Newmark. Directors normally enjoy latitude under the business judgment rule, but during a takeover courts expect them to secure the highest price, which can force a mission-driven firm to sell to whoever pays most.
A benefit corporation changes the duties rather than the business. Its leaders run the company much as usual but must consider employees, suppliers, customers, the community and the environment, not just investors, so a falling share price alone cannot justify ousting them. Each year it must publish a benefit report measured against an independent third-party standard, though few states punish firms that skip it. Converting typically requires a two-thirds shareholder vote, and taxes are identical to those of any other corporation.
The idea spread quickly. By 2022, 37 states allowed the form, Connecticut added clauses letting founders block a later reversion to ordinary status, and Oregon from 2023 let public agencies choose a benefit corporation charging up to 5 per cent more. Abroad, Italy created the Società Benefit in 2015, Colombia legislated in 2018, and British Columbia became Canada's first province to offer the option in June 2020, while Britain had introduced community interest companies in 2005.
Legal status differs from certification. A certified B Corporation is judged by the nonprofit B Lab, must score at least 80 of 200 points on its impact assessment, pass an audit and pay an annual fee.
Source: Benefit corporation
