Benefit Corporation Law and Governance: Pursuing Profit with Purpose

Corporations with a Conscience

Corporations today are embedded in a system of shareholder primacy. Nonfinancial concerns—like worker well-being, environmental impact, and community health—are secondary to the imperative to maximize share price. Benefit corporation governance reorients corporations so that they work for the interests of all stakeholders, not just shareholders.

This is the first authoritative guide to this new form of governance. It is an invaluable guide for legal and financial professionals, as well as interested entrepreneurs and investors who want to understand how purposeful corporate governance can be put into practice.

RickAlexander, the author of BenefitCorporation Law and Governance, is the head of legal policy at B Lab, thenonprofit that certifies "B Corps" and that has been a driving force behind theadoption of the Model Benefit Corporation Act (MBCA).  (The MBCA has beenthe model followed by a majority of states, including Massachusetts.)He was a corporate partner at a prominent Delaware law firm for many years,chaired the bar committee that recommends changes to the Delaware GeneralCorporate Law (DGCL), and helped to draft the public benefit corporation (PBC)statute in Delaware. 
 
His book isan excellent primer for anyone interested in knowing more about the context outof which benefit corporations developed (at B Lab as well as in Delaware), thelimitations of the "shareholder primacy" model of corporate governance, thepros and cons of the MBCA and the Delaware public benefit corporation statute,and the value of establishing a governance model that addresses the needs of a spectrumof stakeholders from a long-term perspective.
 
Benefit Corporation Law andGovernance asks the question at the beginning of Chapter One:"Should the purpose of corporations encompass obligations to protect thesystems that serve all of their stakeholders?"  The discussion thatfollows through the ensuing chapters answers that question in the affirmativeand makes the case that the corporate citizen model embodied in a form ofcorporate governance that considers all stakeholders - and not just shareholderprimacy - is better suited to increase and create value for shareholders aswell as other stakeholders. 
 
Inan increasingly relationship-driven world - accelerated by the rise and spreadof social media - businesses would do well to consider how they can buildmeaningful relationships with stakeholders - including customers, employees andthe community.  In BenefitCorporation Law and Governance, Alexander makes a strong case that thebenefit corporation model establishes a sustainable framework for establishingsuch relationships while freeing corporate culture from a monolithic (and oftendysfunctional) focus on shareholder primacy.

Sharon Lincoln, Partner, Casner & Edwards

Frederick H. Alexander is head of legal policy at B Lab and counsel at Morris, Nichols, Arsht & Tunnell. He has been recognized as one of the ten most highly regarded corporate governance lawyers worldwide and selected as Delaware Corporate Law Lawyer of the Year.