The Benefit Corporation and Corporate Social Responsibility
Janine S.Hiller
Received:21August 2012/Accepted:19November 2012/Published online:6December 2012ÓSpringer Science+Business Media Dordrecht 2012
Abstract In the wake of the most recent financial crisis,corporations have been criticized as being lf-interested and unmindful of their relationship to society.Indeed,the blame is sometimes placed on the corporate legal form,which can exacerbate the tension between duties to shareholders and interests of stakeholders.In comparison,the Benefit Corporation (BC)is a new legal business entity that is obligated to pursue public benefit in addition to the responsibility to return profits to shareholders.It is legally a for-profit,socially obligated,corporate form of business,with all the traditional corporate characteristics combined with societal responsibilities.Considering the history and perception of shareholder primacy in United States law,it is argued that this new business structure is an ethical step toward empowering socially committed commercial enti-ties.The contribution of this rearch is to provide a fun-damental ba of knowledge about the new legal form of business,the BC,upon which further study may rely.First,the legal history of the corporation is
briefly reviewed in order to provide context to the relationship of the corporate form to society,including exploration of the premi that shareholder wealth maximization is its best and only pur-po.Second,the BC is described in detail,and state statutes are compared.Third,the BC is placed within the context of corporate social responsibility.Finally,oppor-tunities for future rearch are discusd.Keywords Benefit Corporation ÁBusiness law ÁCorporate social responsibility ÁDirector duties
Abbreviations BC Benefit Corporation
BEP Benefit enforcement proceeding CSR Corporate social responsibility
Introduction
In the wake of the most recent financial crisis,corporations have been criticized as being lf-interested and unmindful of their relationship to society.The corporate form has been called an ‘‘ailing,’’or ‘‘broken,’’‘‘social technology’’(Metcalf and Benn 2012;Sovacool 2010)and an entity with ‘‘legal personality,but presumably no interest in humanity’’(Munch 2012,p.170).Indeed,the blame is sometimes placed on the legal form,to the extent that it has been argued that,‘‘the corporate form now threatens human survival’’(Metcalf and Benn 2012).
Although corporate law is but one element in the com-plex relationship between business and society,it is often overlooked and sometimes misunderstood.Becau the business entity called a corporation is a creation of the law,not existing parately in nature,it can be modified to meet the needs of society;corporate law scholarship is therefore relevant to the debate of how the social responsibility of a business relates to corporate duties.The Benefit Corpora-tion (BC)is a new legal entity,created by recent legislation in nine states.The primary distinction of a BC is that it is legally obligated to pursue a public benefit in addition to its responsibility to return profits to the shareholders.It is legally a for-profit,socially obligated,corporate form of business,with all of the traditional corporate characteristics but with required societal responsibilities.
The purpo of this article is to bring focus to the corporate law dimension of corporate responsibility.Considering the
J.S.Hiller (&)
Department of Finance,Insurance and Business Law,
Virginia Tech,Mail Code 0221,Blacksburg 24061,Virginia e-mail:jhiller@vt.edu
J Bus Ethics (2013)118:287–301DOI 10.1007/s10551-012-1580-3
history and perception of shareholder primacy in United States law,it is argued that this new business structure is an ethical step toward empowering socially committed com-mercial entities.The contribution of this rearch is to pro-vide a fundamental ba of knowledge about the new legal form of business,the BC,upon which further study may rely. First,the legal history of the corporation is briefly reviewed in order to provide context to the relationship of the corporate form to society,including exploration of the premi that shareholder wealth maximization is its best and only pur-po.Second,the BC will be described in detail,and state statutes will be compared.Third,the BC will be placed within the context of corporate social responsibility(CSR). Finally,opportunities for future rearch will be discusd. History and Evolution:The Corporate Form and its Relationship to a Social Purpo
The evolution and design of the BC is inextricably linked to,and responds to,an existing paradigm of maximization of profit as the legal purpo of a corporation,whether or not this legal limit is real or perceived.A brief review of the history of the corporate form and its evolution through stages of development until the BC statutes of today is esntial to an understanding of how this new legal form relates to social responsibilities of thefirm.
Early Connections Between Corporate Purpo
and Society
A corporation is created under state law(versus federal). Although some of the elements of the corporation could be created privately without a statute,through a contract between owners and managers,the sina qua non of cor-porate existence,limited liability and parate existence,is purely a statutory construct.Today,every state has an incorporation statute;if a business follows the standardized requirements andfiles the proper paper work,it will automatically be granted corporate standing.It was not always so.In the late eighteenth and early nineteenth centuries,a corporation could exist only as a result of an individual state legislative act;that is,each and every business was required to individually petition the legisla-ture for approval to act as a corporation.In addition,a corporation was granted existence and limited liability only in order to perform a stated public function(Deskins2011; McBride2011).
Bad on individual petitions,legislatures granted state approval for independent corporate status in order that the entity might perform public functions such as build-ing roads,providing water,and the like.There was a clo connection between corporate purpo and societal purpo,and becau the corporation was performing a quasi-governmental role,limited liability accompanied the corporate form(McBride2011;Sprague2010).
During industrialization,the number of incorporation petitions submitted to state legislatures escalated to an unmanageable number.In order to handle the incread requests for incorporation,thefirst general incorporation statute was pasd by New York in1811(Deskins2011). Yet at this point,the incorporation documents were still required to state with specificity the purpo of the cor-poration.Eventually,beginning with Delaware and New Jery,states began liberalizing the incorporation purpo requirement until the statement of‘‘any and all legal pur-pos’’was sufficient to describe the relationship between the nascent corporation and society(Sprague2010).While the administrative approval of corporate charters incread efficiency and was no longer subject to the decision of an elected legislature,the more uniform incorporation and approval process weakened the corporate-society link. Shareholder Primacy and Wealth Maximization
A century after thefirst general incorporation statute,the Delaware court’s decision in Dodge v.Ford provided the legal basis for a corporate metamorphosis;shareholder primacy and profit maximization as an explicitly recog-nized legal doctrine.The often-quoted decision stated;
A business corporation is organized and carried on
primarily for the profit of the stockholders[emphasis added].The powers of the directors are to be em
ployed for that end.The discretion of directors is to be exercid in the choice of means to attain that end,and does not extend to a change in the end itlf, to the reduction of profits,or to the nondistribution of profits among stockholders in order to devote them to other purpos(Dodge v.Ford1919)
While a review of cas since Dodge v.Ford is beyond the scope of this article,under today’s corporate law,it is fair to say that the principles of exclusive shareholder primacy and sole profit maximization are limited;corporate decision makers have much greater latitude than Dodge v.Ford would suggest(Munch2012;Schoenjahn2012;Snierson2011).
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To determine whether a corporate director is liable for a decision that does not maximize shareholder wealth,a court will determine if the director breached hisfiduciary duty,by applying the business judgment rule.The business judgment rule is a relatively easy standard for a director to meet for ordinary business decisions,requiring that he or she be informed and act in the good faith honest belief that the decision is in the best interest of the corporation(Clark and Babson2012;Resor2012).In a takeover or change of control decision,the business judgment rule is applied in a
288J.S.Hiller
more stringent manner.In the1986ca of Revlon v. McAndrews,a Delaware court held that when a business sale is the topic of directors’decisions,the interests of stakeholders are not to be weighed against tho factors in favor of the shareholder profit(Haymore2011).The dilemma faced by the owners of Ben&Jerry’s when lling their business is well known;they felt compelled to ll to the highest bidder,Unilever,rather than ek to ll to an entity who pledged to prerve their commitment to socially responsible practices.The owners stated that ‘‘corporate law made them do it’’(Murray2012,p.14). This statement was never tested in court becau the owners did ll to the highest bidder;whether the sale was necessary under the business judgment rule is challenged by Page and Katz(2012),who argue that it is not corporate law that is the most significant restraint on a corporation’s social mission,but its leaders andfinancial limitations. However,online respons to the Page&Katz article (including an opinion from an attorney for Ben&Jerry’s original owner)disagree with the idea that corporate law played an insignificant role in the decision to ll.The online debate offers evidence that in practice corporate law shareholder primacy matters;while it may not be the sole limitation to implementation of a social purpo,it does significantly affect decision making.
A recent Delaware ca involving eBay and craigslist provides further insight into corporate law’s emphasis on shareholder wealth creation.This ca is particularly important becau of the influence
of Delaware corporate law on other states and becau of the large number of corporations that are chartered in Delaware.
eBay invested in craigslist,becoming one of three shareholders;the other two owners were the two original founders.The three shareholders also constituted the three-member board of directors.A conflict emerged between the profit focus of eBay and the community focus of craigslist founders.As the pressure for profits by eBay became more acute,a complicated ries of events led the two founding craigslist directors,as a majority,to adopt veral corporate governance measures as defensive tactics to a takeover.One tactic was a poison pill designed to prerve the corporate culture of craigslist into future generations,and thwart the profit maximization approach of stockholders such as eBay. eBay sued,alleging that the majority directors violated their fiduciary duties by passing the anti-takeover provisions,in esnce preferring community building over profit.The Delaware court applied an intermediate legal review of the anti-takeover provisions,using a standard that required the two board directors to prove that they acted in a‘‘good faith pursuit of a proper corporate purpo.’’(eBay Domestic Holdings,Inc,v.Newmark2010,p.34)Although prer-vation of corporate culture had been judicially recognized as a proper purpo in previous cas,this court characterized the precedent as a‘‘muted embrace,’’thereby diminishing the effect of tho deci
sions(ebay,p.32).The court pon-dered that‘‘Perhaps the most mysterious thing about cra-igslist’s continued success is the fact that craigslist does not expend any great effort eking to maximize its profits or to monitor its competition or its market share’’(eBay,p.8). Thus,the Delaware court declined to uphold the craigslist poison pill becau the prervation of perplexing(to the court)community building had no rational relationship to shareholder profits.Requiring some rational connection to profit,the court stated that‘‘Directors of a for-profit Dela-ware corporation cannot deploy a rights plan to defend a business strategy that openly eschews stockholder wealth maximization—at least not consistently with the directors’fiduciary duties under Delaware law’’(eBay,p.35).Thus,in at least specific circumstances under Delaware law,the duty to deliver wealth to shareholders is primary.(In contrast,BC legislation,as en in later discussions,can rebalance the preference of profit over community,and may explicitly overrule the profit maximization principle.) Constituency Statutes and Public Welfare
Although Delaware is not among them,33states have adopted what are known as‘‘constituency statutes.’’The statutes allow directors,in the exerci of theirfiduciary duties,to take into consideration broader interests than merely profit maximization for shareholders.The statutes vary,but most were pasd in respon to takeover situations such as the one faced by craigslist,an
趁早张惠妹d allow directors to consider the effects of the sale or merger on employees and communities,among other third parties(Conaway2012; Gelter2009;Lacovera2011).It is important to note that constituency statutes permit,but do not require,that other interests be considered,and do not clearly provide for con-sideration of the interests without regards to tho of shareholder wealth enhancement(Tyler2010).
In addition to constituency statutes,some state corporate statutes explicitly provide that a corporation may u their resources,such as making a donation,for nonprofit or public good purpos.A standard that is recommended by the American Law Institute integrates the two concepts, profit and public good,by providing that while the purpo of a corporation should be‘‘the conduct of business activities with a view to enhancing corporate profit and shareholder gain,’’that in any ca a corporation‘‘May devote a reasonable amount of resources to public welfare, humanitarian,educational,and philanthropic purpos’’(Clark and Babson2012).Yet,this recommendation to allow reasonable resources to be ud for public welfare does not specifically allow a corporation to choo a social purpo above the profit enhancing duty,and what is a reasonable amount is subject to dispute.
Benefit Corporation and CSR289
插字组词
海底两万里读书笔记200字Summary
While constituency statutes allow the corporate consider-ation of broader factors than profit,and state statutes often specifically allow for charitable gifts,it is unclear how far a corporation may go to promote social goals,so that it has been said that‘‘The traditional corporate model limits the way in which socially responsible entrepreneurs can u the corporate vehicle to advance social good’’(Deskins 2011,p.1061).
There are conflicting viewpoints as to whether,and to what extent,the business judgment rule allows extensive directorflexibility to make decisions that diverge from wealth maximization for shareholders,or whether the corporate law maxim of shareholder primacy as illustrated in the Delaware courts is a significant restraint on corporate consideration of a social purpo(Tyler2010).Variations of the viewpoints have been debated for decades and cannot be reprid in full here;what is important for the discussion of BCs is that shareholder primacy principles continue to populate corporate thinking in the United States,(Kelly2009)legal support remains,and perceptions of the extent of corporate law doctrine have affected practice and the business environment.In sum, Although the vibrancy of shareholder primacy has at times been called into question as a matter of law, both boardrooms and courts have taken the normative call for sharehold
er wealth maximization increasingly to heart.There is little doubt that the revolution has not only substantially affected legal theory but also legislation,court decisions,and corporate behavior (Bodie2012,pp.1033–1034).
搜狗网址Evolution of the BC and Comparison with the BCorp The distinction between a BCorp and a BC is fundamental, and is extraordinarily important to an understanding of the corporate law–CSR link.While the two types and their legal effect are unique,the clo history and similar ter-minology can cau confusion,and potentially misplaced criticism.Therefore,the following ction describes the BCorp before turning to a more detailed analysis of the BC.
BCorps
Founded in2007,the BLab organization promotes socially aware business practices by providing an opportunity for a business to voluntarily adopt responsible standards of deci-sion making.By voluntarily joining and meeting a certain level in socially responsible standards t by B Lab,a cer-tification entity,a business(whether or not it is a corporation)can become a BCorp.How is B Lab different than other standard tting organizations,and why would an entity choo to become a BCorp?B Lab eks‘‘systemic change’’(B Lab:The Nonprofit behind B Corps;www.bcor poratio
n/The-Non-Profit-behind-B-Corps)in two ways: by differentiation of socially positive actions from marketing ploys,and by providing a solution for‘‘existing corporate law that demands that business prioritize shareholder value maximization to the exclusion of the value created for all stakeholders.’’It acts in three ways:providing a certification for‘‘good companies,’’encouraging responsible investment by providing ratings that can be ud by investors,and pro-moting a new legal business entity that will be more socially purpoful,accountable,and transparent(B Lab:The Non-profit behind B Corps;www.bcorporation/The-Non-Profit-behind-B-Corps).
To become a BCorp,a business must complete an asssment and submit supporting documents to BLab, revi articles of incorporation as necessary(depending on the state of incorporation),agree to the terms of member-ship(a term sheet),and pay fees bad on size.In order to earn the designation,a company must earn80points out of approximately200in the asssment.The number and kind of asssment questions depends on the type of business and its size.For example,a manufacturing company would be required to answer more questions about their rela-tionship with suppliers than a rvicefirm.If a business earns the BCorp certification,it is subject to a random annual review.(www.bcorporation/Certification-Overview).
The process of certification generates a B Report that includes veral broad categories:Governanc
e,Workers, Community,and Environment.The categories contain further subcategories:Governance includes Transparency and Accountability;Workers includes Compensation Benefits and Training,Ownership,and Work Environment; Community includes Products and Services,and further enumerated Community Practices;and Environment includes Products and Services,and further enumerated Environmental Practices.If a business earns60%of the available points in a Category,then it is highlighted as an Area of Excellence for that business.The BCorp ratings and report are made publicly available on the website.
A business that is a BCorp is not a different legal entity, but a member of a voluntary association subject to an asssment and ratings standard that supports corporate responsibility in veral key areas of business endeavors. The BCorp intercts with corporate law at the point that changes to articles of incorporation,or limited liability company,or partnership documents(for simplicity,further reference will be to incorporation)are required.Depending on the state and its relevant incorporation and statutory provisions,a company may need to amend its articles of
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incorporation in unique ways;there arefive differing variations that depend on the state statute.For ex
ample,the basic articles amendment for a corporation in a state with a constituency statute is the following:
In discharging his or her duties,and in determining what is in the best interests of the Company and its shareholders,a Director shall consider such factors as the Director deems relevant,including,but not lim-ited to,the long-term prospects and interests of the Company and its shareholders,and the social,eco-nomic,legal,or other effects of any action on the current and retired employees,the suppliers and customers of the Company or its subsidiaries,and the communities and society in which the Company or its subsidiaries operate,(collectively,with the share-holders,the‘‘Stakeholders’’),together with the short-term,as well as long-term,interests of its share-holders and the effect of the Company’s operations (and its subsidiaries’operations)on society and the economy of the state,the region and the nation…
Notwithstanding the foregoing,any Director is enti-tled to rely upon the definition of‘‘best interests’’as t forth above in enforcing his or her rights here-under,and under state law and such reliance shall not, abnt another breach,be construed as a breach of a Director’sfiduciary duty of care,even in the context of a Change in Control Transaction where,as a result of weighing other Stakeholders’interests,a Director determines to accept an offer,between two compet-ing offers,with a
lower price per share.(www.
法门寺博物馆bcorporation/index.cfm/fuaction/content.page/
nodeID/ee7101cb-575f-47b6-8771-6bff1ca4be01)
The key language in this required amendment is the inclusion of the consideration of stakeholders in thefidu-ciary duties of directors.In the13states without constit-uency statutes,the BLab declares;
Since your state does NOT currently have a corporate statute that explicitly allows directors to consider the interests of stakeholders(often called a‘constituency statute’),the best we can do together is to build the language of the B Corp legal framework into your Term Sheet for B Corp certification.
The Term Sheet commits your company to consider stakeholders to the extent possible within the current corporate laws of your state;to support BC legislation when we move forward in your state;and,once legislation becomes law,to adopt BC status by the end of your next2-year certification term( www.bcorporation/index.cfm/fuaction/content.
page/nodeID/index.cfm/fuaction/content.page/node ID/a922196d-bd14-4b3d-a7bc-6a23e030e263)
.
In sum,by agreeing to the relevant term sheet provi-sions,the BCorp entity enters into a private contractual agreement to act as required to consider broader stake-holder interests.Note,however,the language in the pre-ceding paragraph;the term sheet recognizes that state law may not allow stakeholders to be considered above or at par with shareholder profit,and that BC legislation would be necessary to legally change the corporate director’s duties(Haymore2011).B Lab has been the primary pro-moter of BC state statutes,and has encouraged Model BC legislation for adoption by state legislatures.
In comparison,if the business is incorporated as a BC under an applicable state statute,then no private agreement is needed becau the stakeholder framework is included in the BC statute.Thus,although the genesis of the Business Corporation movement evolved from the nonprofit group, the legally created BC is independent from the Bcorp.
储存单位A business may choo to be a BC without being a BCorp and without being certified by BLab.
The Benefit Corporation制作用英语怎么说
At this time,nine states have adopted a BC statute:Cali-fornia,Hawaii(Hawaii’s statute is called a Sustainable Business Corporation law),Louisiana,New Jery,New York,South Carolina,Vermont,and Virginia.State adoption of a BC statute eks to address head-on the shareholder primacy and profit maximization standards and to change the duties of directors and officers to include social and envi-ronmental considerations.In other words,a goal of the leg-islation is to create a new understanding of corporate identity by building consideration of social and environmental con-siderations‘‘into the corporate DNA’’(W.Clark,personal communication).State statutes are primarily bad on the model law that is propod by B Lab,therefore the following discussion will focus on the model act provisionsfirst,then describe significant differences between the states.
The BC must be founded as a C corporation under established state law.The entity must follow all incorpo-ration steps,and the entity is subject to all other relevant statutes that relate to the formation and governance of a for-profit corporation.Therefore,a BC is legally a for-profit,corporate entity that has also voluntarily chon to adopt a statement in its articles of incorporation that it is a BC;it is then subject to the additional specific duties and purpos t forth in the benefit statute.
The primary aspects of the statute may be divided into five areas:(1)the purpo of the corporation to provide a public benefit,(2)the independent third-party standard to annually review corporate publi
c benefit,(3)the duties of directors to consider a broader spectrum of interests beyond shareholder profit,(4)transparency,and(5)
Benefit Corporation and CSR291
