HARRISBURG, February 7, 2011 – State Sen. Daylin Leach today held a press conference unveiling landmark new legislation that would change the structure of business in Pennsylvania by creating a new class of corporation.
That new class would provide for the recognition of Benefit Corporations
(“B Corps”) -- businesses that have the ability to more positively impact their communities and create a new incentive to encourage corporate activism. The Benefit Corporation class would reclassify the fiduciary duties of corporation directors, allowing them to take non-financial interests into consideration when making decisions for the corporation.
“Simply put, this legislation would allow businesses to use their power and influence to solve social and environmental problems without needing to muddle through red tape and the current corporate legal environment,” Leach said. “Under this new model of business management, corporations will have unsurpassed freedom and accountability in their decision-making process so that they may ultimately make decisions that are good for society, rather than just for their shareholders.”
Under Senate Bill 433, companies that see value in making a positive social and environmental impact on their communities would be able to make those “for benefit” operations part of their corporate mission. Other corporation classes do not currently allow directors to take not-for-profit benefits into account. Under the new corporate classification model, Benefit Corporations could not be held liable for lost monetary value as a result of socially-conscious decisions made.
Sen. Mary Jo White (R-Venango), the bill’s prime co-sponsor, added:
“Benefit Corporations are an intriguing concept that I believe is worth exploring, and I look forward to hearing from Pennsylvania businesses as this legislation moves forward. With their input, Pennsylvania can establish a new voluntary class of corporation that would be appealing to those investors looking for information that goes beyond the traditional bottom line to include a host of community interests. Additionally, in times of government belt-tightening, this could be a tool for the private sector to provide assistance to local communities.”
Sens. Leach and White were joined by Jay Coen Gilbert, co-founder of B Lab, and Jacob Gray, Managing Partner at Murex Investments and Founder of Good Company Ventures in support of the bill.
Leach noted that the process of becoming a Benefit Corporation is entirely voluntary and based on shareholder desire. If a business chooses to become a Benefit Corporation, it must designate a benefit director and provide yearly disclosures to shareholders of the public benefit efforts the company has undertaken.
According to B Lab, Certified B Corporations meet rigorous standards of social and environmental performance, legally expand their corporate responsibilities to include consideration of stakeholder interests and build collective voice through the power of the unifying B Corporation brand.
Jay Coen Gilbert summed up the positive impact the new corporate classification could make upon communities by saying, “Current corporate law makes it difficult for businesses to take employee, community, and environmental interests into consideration when making decisions, and a lack of transparency makes it difficult to tell the difference between a 'good company' and just good marketing. B Corporations' performance standards enable consumers to support businesses that align with their values, investors to drive capital to higher impact investments, and governments and multinational corporations to implement sustainable procurement policies. That’s the change we seek.”
As of August 2010, there are over 320 certified B Corporations from over 60 industries. Similar legislation has been enacted in Maryland and Vermont, is being considered in California, New York, North Carolina, Oregon and Colorado. The legislation is supported by the Pennsylvania Bar Association.
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