It can be difficult for executives and entrepreneurs to determine how they will balance the interests of stockholders with a desire to have a positive social impact. Incorporating as a “public benefit corporation” (or “P.B.C.”) is one way to balance public benefits purposes with fiduciary responsibilities. On August 1, Delaware became the 19th state to include a framework for P.B.C. incorporation under state law. Because of Delaware’s business-friendly reputation (according to the state’s Web site, more than 50% of all publicly-traded companies and 64% of Fortune 500 companies are incorporated there), this move is likely to lead to an explosion in P.B.C. incorporations.
Under the new Delaware law (Subchapter XV, Sections 361-368 of the Delaware General Corporation Law), the P.B.C. is defined as “a for-profit corporation … that is intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner,” with public benefit defined as “a positive effect (or reduction of negative effects) on one or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.” The directors of a P.B.C. are legally obligated to manage the company “in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in its certificate of incorporation.”
Companies looking to balance social good with stockholder interests, enhance public perception of their business and increase access to capital funding sources that value corporate social responsibility should consider the advantages of incorporating as or converting to a P.B.C. For more on the opportunities and challenges associated with P.B.C.’s, talk with your legal team, or with a law firm that specializes in incorporation; our Arc attorney Jeff Fromm is experienced in this area.
(Photo Credit JohnPickenPhoto on Flickr)