New Business Designation To Highlight Good Deeds
Massachusetts companies that enrich society in addition to meeting shareholders' demands can now tout their good works and expand their business goals by filing as a "benefit corporation" with the secretary of state's office.
"They're competing not to just be best in the world but best for the world," said Andrew Kassoy, founder of B Lab, which encourages legislation around the country to allow for-profit corporations to prioritize good works as well as profit. "They're creating great jobs, they're restoring the environment, and they're eliminating poverty."
The new designation of benefit corporations, or B-Corps, was part of the economic development law that Gov. Deval Patrick signed in August, making Massachusetts the tenth state with such a designation, according to Kassoy, who spoke at a State House press conference on B-corps on Monday.
The Harvard Business Review recently likened the B-Corp designation to LEED certification among developers and the Fair Trade designation among coffee suppliers.
"I had an idea that this would not only be good for our society, not only be good for our company – intuitively, I thought this would be good for our commonwealth because it would perhaps attract some socially conscious investors," said Sen. Brian Joyce (D-Milton), who included the language in the Senate Bonding Committee's re-write of the jobs bill and introduced initial B-Corp filers during Monday's Senate session. "You know increasingly folks are not only looking to maximize their return, but to put those investment dollars towards good social purposes, and here we marry the two."
The designation signals to the public that a company does good works; it does not include any tax breaks or other direct monetary benefit, according to Joyce and Kassoy.
Joyce said he was encouraged by the news that DiMagi, a Cambridge software company that had been registered in Delaware had re-registered in Massachusetts to take advantage of the benefit corporation designation, which he said is unavailable in Delaware.
"For us it's really about marketing and it's about recruiting," said DiMagi Chief Operations Officer Carter Powers. According to corporate filings, DiMagi registered as a benefit corporation Nov. 29.
According to the law, benefit corporations are required to have at least one benefit director, who ensures that the company actually does serve a public benefit, and the companies are required to produce an annual public benefit report. Companies may secure the designation just by filing for it; the law stipulates that benefit corporations must file their annual reports with the state and shareholders, and make them available to the public.
Shareholders serve as the watchdog to ensure companies are actually committed to benefitting the public, according to Kassoy.
"The shareholders have a right of action," Kassoy said. Beyond its image-boosting potential, the designation allows corporate officers to legally weigh how it can benefit the public alongside profits.
"They've changed the fundamental purpose of the company to be not just about creating shareholder value but also value for stakeholders," said Kassoy.
Companies must use a "third party standard" to show how they are creating a public benefit – though not an outside auditor – and companies can also list specific benefits, such as providing low-income housing, promoting the arts, sciences and knowledge, improving public health and others, according to Kassoy and the language of the law.
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