North Carolina should recognize benefit corporations

BY DEVIN WALSH

There’s been much debate in the news lately over whether or how to force or incentivize corporations to behave like good citizens. Tax the bejesus out of them; slash the bejesus out of their taxes. Penalize the ones that leave; repatriate them. Limit their political contributions; unfetter them. Regulate, deregulate, yadda yadda yadda. If you live in North Carolina, you could be forgiven if you haven’t already heard about one approach that’s rapidly gaining traction around the country. Nonetheless, B corporations are revolutionizing the way businesses do business.

Like LEED buildings or fair trade coffee, B-corp certification carries sociocultural rather than legal significance. According to B Lab, the nonprofit that coined the term, being B-corp-certified means the business is dedicated to both earning a profit for its shareholders and benefiting the general public. It’s a “no-duh” proposition that, certainly, our free marketplace has always recognized, right?

Well, actually, no. It’s a well-established principle in our system that a corporation’s only obligation is to increase shareholder value. Until recently, there was no legal protection for a company culture that emphasized nonwealth-maximizing endeavors. This was underscored when the Delaware Court of Chancery concluded an epic wrestling match between eBay and Craigslist in 2010 by ruling that “Promoting, protecting or pursuing nonstockholder considerations … must lead at some point to value for stockholders.”

Coming as it did in the beating heart of America’s corporate culture (north of 60 percent of Fortune 500 businesses are incorporated in Delaware), this decision encouraged B Lab to take a different tack in its campaign to reorient the corporate soul. In April of that year, Maryland became the first state to sign into law legislation that recognized the “benefit corporation” as a legal entity.

In contrast to B-corp certification, organizing one’s business as a benefit corporation packs a legal (dare I say Delaware?) punch. For the board members of Warby Parker, Patagonia, Etsy and Seventh Generation (to name only a few), the relentless drumbeat to increase shareholder value doesn’t have to be the only one they march to. Indeed, they’re required to be good, too.

Today, 30 states plus the District of Columbia recognize benefit corporations. To be clear, these are still for-profit entities: Most have C- or S-style corporate structures. (Illinois lets LLCs join in the fun, too.) In those states, though, folks have the freedom to arrange their business in a way that gives their philanthropic instincts legal protection.

I once heard Hickory Nut Gap farmer John Ager, Fairview’s homespun representative to the N.C. General Assembly, refer to our state as “a valley of humility between two mountains of conceit.” But in this case, the mountains of conceit have whupped us. Virginia recognized benefit corporations in 2011, and South Carolina followed suit in 2012. Tennessee got in on the act last year. Evidently our elected mandarins in Raleigh have had their hands full dealing with more important stuff.

Rep. Susan Fisher, who served on the N.C. House committee that failed to advance benefit corporation legislation to a vote, told me she didn’t recall it having been particularly objected to at the time. State Sen. Terry Van Duyn told me she didn’t know why the Republican leadership had opposed it. Council member Gordon Smith said he’d be interested in exploring ways the city of Asheville could encourage B-corps, and City Manager Gary Jackson said, “We would definitely love to see the expansion of ethical, socially responsible business practices here.” Philadelphia passed a tax credit package for B-corps in 2009 and is currently seeking to double it.

The first time I ever heard of a triple-bottom-line business, I was on a tour of Riverbend Malt House, and co-owner Brent Manning had just told us that that’s what they were going for: specifically, to benefit the environment and their employees in addition to making a living. Another person on that tour was Jeff Larsen, who’s now a materials handler at New Belgium Brewing. In addition to being a certified B-corp, the brewery is incorporated as a benefit corporation in Colorado, its home state.

“There’s always room for improvement in our B-corp score,” he told me. “It’s a mindset. We’re always trying to improve and do better: use less water, use our energy more efficiently.”

New Belgium communications specialist Susanne Hackett said: “It provides us protection in our bylaws to make decisions based on more than just profit. We have been advocating and working with other B-corps to raise awareness about the importance of progressive business and how great it is for our communities in North Carolina. We’re missing out by not having B-corp legislation.”

So what gives, Raleigh?

Devin Walsh lives and works in Asheville.