Benefit Company Legislation Allows For-Profit Companies to Give Back

Corporate law has traditionally required directors and officers of for-profit companies to make decisions with the primary goal of maximizing shareholder profit, leaving little room for considerations like the good of the greater community. With growing concerns over the environment and social welfare, many business leaders have begun to push back on this bottom-line driven tradition, seeking to both make money for their shareholders and provide a benefit to society.

Answering this need for flexibility in corporate governance, nineteen states and the District of Columbia have passed “benefit company” legislation, creating a new type of business entity that allows corporate directors and officers to consider environmental and social impacts when making decisions on behalf of the company. Although the specifics of benefit company legislation vary from state to state, most statutes contain the following key provisions:

  • a specified percentage of the company’s shareholders must vote to opt in,
  • the company must provide some benefit to stakeholders other than the company’s shareholders,
  • the company must assess its public benefit using a third-party standard, and
  • the company must report to its shareholders about the public benefit(s) it has provided.

Benefit company legislation is still relatively new, but already companies nationwide are embracing the opportunity to give back to society, even if it means foregoing some amount of profit. If providing a public benefit is a core value of your business, you might wish to consider registering as a benefit company.