The Good Guy of Corporations: B Corporations and the Efficiencies of an Environmentally and Socially Conscious Entity

Abstract

The twenty-first century, and the most recent economic crash, have brought new trials and tribulations. Corporations are facing a rise in anti-corporatist moods throughout the public. Within this context, a creative attempt to address social and environmental problems has given rise to a new type of corporate model — the B, or benefit corporation. A creation of state legislation, like other corporate models, the B Corporation overcomes the “shareholder primacy” limitation, which requires corporate officers solely to maximize profits. Instead, B Corporations commit, in their articles of incorporation, to create a general public-benefit or specific public-benefit. Public-benefit’s can include the environment, creating jobs outside the normal course of business, or safe labor practices. This article does not argue which normative principle, profit-maximization or benefit-maximization, is superior. Instead, I demonstrate that the B Corporation model creates long-term efficiencies for a corporation, humanizes the corporation, and increases shareholder value. This paper catalogs gains in efficiency that companies can achieve by incorporating — or reincorporating — as a B corporation. Specifically, the areas discussed include, among other things: greater access to capital markets and decrease in cost of capital; reduction in risk-associated costs of state and federal enforcement actions; reduction in litigation costs and insurance costs; and increases in brand value and good will. The article concludes with a brief discussion of the potential, perceived disadvantages of B Corporations.As a final note, as this article is being written B Corporation legislation is proliferating across the United States. Much like the modern LLC, only recently adopted in 1977, the B Corporation, as it gains acceptance among the business community as a legitimate corporate structure, will reach its true potential — a new corporate model for a new century.