Stewards of the Visual Exposition
'B' Corps Bill Would Let For-Profit Companies Pursue Charitable Purposes
Publisher's note: The author of this fine report, Dan Way, is an associate editor of the Carolina Journal, John Hood Publisher.
Critics worry change would empower socialist enterprises
RALEIGH Supporters called it "a new concept" allowing North Carolina corporations to operate as for-profit entities with an environmental and public benefit mission. Critics said it was more insidious, and linked to a socialist agenda. After 25 minutes of debate Wednesday, the House Judiciary Subcommittee B approved House Bill 440.
"There are entrepreneurial people who are sort of caught" between the limited choice of forming nonprofit or for-profit corporations, said Rep. Chuck McGrady, R-Henderson, a primary sponsor of the North Carolina Benefit Corporation Act.
"This is sort of in the middle" and allows entrepreneurs to earn profits while simultaneously pursuing a broader, more altruistic purpose, McGrady said. Socially conscious companies such as Whole Foods, Ben & Jerry's, and Newman's Own would be the types of corporations that could form under this legislation, he said.
Benefit corporations -- commonly referred to as "B corporations" -- are legal in 14 states, including Virginia and South Carolina, but not in North Carolina.
"A similar bill to the one we're moving right now has already passed through one side of the Delaware legislature and will, by all expectations, become law by the end of the year," McGrady said.
"For corporate lawyers among us, we know that once Delaware goes, most of the corporations in the United States are incorporated there, so this will become widely mainstream," he said.
But Wynne Coleman, who identified herself as an interested citizen, said there was an "underlying philosophy" of the bill that demands notice. She said she decided to "delve deeply" into benefit corporation issues while serving on the Wake County Sustainability Task Force as a representative of the Wake County Taxpayers Association in 2010.
Coleman attempted to link benefits corporation principles to the sustainable development movement launched through a United Nations commission in 1987 by Norway Prime Minister Gro Harlem Bruntland, who was vice president of the World Socialist Party.
The "core concept" of sustainable development is the "three Es", she said -- economy, environment, and social equity -- concepts antithetical to the state and U.S. constitutions and free enterprise.
She summed up those concepts as: B corporations blurring the lines and blending corporate sectors of the economy; the need to regulate human acts that threaten the environment; and social equity as equalizing outcomes for social groups rather than maximizing stockholder benefits, respectively.
McGrady dismissed those remarks, but said if his bill were approved, prior to going to a floor vote, he was willing to hear more from a Cary engineer who said he has worked to help develop international standards for corporations.
Scott DeDoug said the bill has a "lack of open standards," which are rigorous specifications that take years to develop and approve, and can be tested for consistency and objectivity to replace all ambiguity.
Instead, the bill requires an annual third-party review that he likened to a "Betty Crocker, Good Housekeeping Seal of Approval." The annual review should be optional, he warned, because of issues he has encountered with LEED [Leadership in Energy and Environmental Design] and the U.S. Green Building Council, whose environmental models are similar to benefit corporation concepts.
One company that enforces mandatory LEED green standards, and is active in global warming and sustainable development circles, is owned by former Soviet Union president Mikhail Gorbachev, he said.
McGrady defended the bill as neither liberal nor conservative. But he noted that lawmakers who have championed the legislation in other states are graduates of Bob Jones University, "not any hotbed of liberal thought," and that the conservative, Arizona-based Goldwater Institute supports it.
William Clark, who practices corporate law in Philadelphia and said he has been working on benefit corporation law since its beginning, assured committee members there is no attempt to change corporate law.
"I don't think that this is a radical notion that's trying to fundamentally change our capitalist society," Clark said. "Frankly, I've been vested in our system all of my life. Republican governors have looked at this and signed it." As examples, he cited Jan Brewer in Arizona, Chris Christie in New Jersey, Bobby Jindal in Louisiana, and Nikki Haley in South Carolina.
According to a legislative summary of the bill, a benefit corporation "must include within its corporate purposes a general public benefit that has a material positive impact on society and the environment." That impact would be subject to a third-party review.
Specific public benefit purposes could include providing beneficial products or services to low-income or underserved individuals or communities; promoting economic opportunity beyond creation of jobs; preserving or improving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; and increasing the flow of capital to entities with a public benefit purpose.
An existing company would need a 90 percent vote of shareholders to transform into a benefit corporation. If that took place, those voting against the conversion could withdraw their money and leave the corporation.
"I'm very supportive of this bill," said Rep. Rick Glazier, D-Cumberland. He said it would "fill in gaps where government no longer can or should go" and give the private sector more self-responsibility.
Rep. Leo Daughtry, R-Johnston, said corporate leaders "are charged to maximize the pecuniary benefit of the stockholders. That's your main job." A benefit corporation would allow them to pursue socially worthy missions without being subjected to lawsuits from stockholders, he said.
"South Carolina just did it, and they are pleased, and they are creating new jobs, he said.
Rep. Jason Saine, R-Lincoln, wondered whether a benefit corporation is "a back door for corporations to use profits to be more politically active."
Rep. Paul "Skip" Stam, R-Wake, said, "Under recent U.S. Supreme Court decisions, any corporation can" be politically active, even for-profit ones.
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Critics worry change would empower socialist enterprises
RALEIGH Supporters called it "a new concept" allowing North Carolina corporations to operate as for-profit entities with an environmental and public benefit mission. Critics said it was more insidious, and linked to a socialist agenda. After 25 minutes of debate Wednesday, the House Judiciary Subcommittee B approved House Bill 440.
"There are entrepreneurial people who are sort of caught" between the limited choice of forming nonprofit or for-profit corporations, said Rep. Chuck McGrady, R-Henderson, a primary sponsor of the North Carolina Benefit Corporation Act.
"This is sort of in the middle" and allows entrepreneurs to earn profits while simultaneously pursuing a broader, more altruistic purpose, McGrady said. Socially conscious companies such as Whole Foods, Ben & Jerry's, and Newman's Own would be the types of corporations that could form under this legislation, he said.
Benefit corporations -- commonly referred to as "B corporations" -- are legal in 14 states, including Virginia and South Carolina, but not in North Carolina.
"A similar bill to the one we're moving right now has already passed through one side of the Delaware legislature and will, by all expectations, become law by the end of the year," McGrady said.
"For corporate lawyers among us, we know that once Delaware goes, most of the corporations in the United States are incorporated there, so this will become widely mainstream," he said.
But Wynne Coleman, who identified herself as an interested citizen, said there was an "underlying philosophy" of the bill that demands notice. She said she decided to "delve deeply" into benefit corporation issues while serving on the Wake County Sustainability Task Force as a representative of the Wake County Taxpayers Association in 2010.
Coleman attempted to link benefits corporation principles to the sustainable development movement launched through a United Nations commission in 1987 by Norway Prime Minister Gro Harlem Bruntland, who was vice president of the World Socialist Party.
The "core concept" of sustainable development is the "three Es", she said -- economy, environment, and social equity -- concepts antithetical to the state and U.S. constitutions and free enterprise.
She summed up those concepts as: B corporations blurring the lines and blending corporate sectors of the economy; the need to regulate human acts that threaten the environment; and social equity as equalizing outcomes for social groups rather than maximizing stockholder benefits, respectively.
McGrady dismissed those remarks, but said if his bill were approved, prior to going to a floor vote, he was willing to hear more from a Cary engineer who said he has worked to help develop international standards for corporations.
Scott DeDoug said the bill has a "lack of open standards," which are rigorous specifications that take years to develop and approve, and can be tested for consistency and objectivity to replace all ambiguity.
Instead, the bill requires an annual third-party review that he likened to a "Betty Crocker, Good Housekeeping Seal of Approval." The annual review should be optional, he warned, because of issues he has encountered with LEED [Leadership in Energy and Environmental Design] and the U.S. Green Building Council, whose environmental models are similar to benefit corporation concepts.
One company that enforces mandatory LEED green standards, and is active in global warming and sustainable development circles, is owned by former Soviet Union president Mikhail Gorbachev, he said.
McGrady defended the bill as neither liberal nor conservative. But he noted that lawmakers who have championed the legislation in other states are graduates of Bob Jones University, "not any hotbed of liberal thought," and that the conservative, Arizona-based Goldwater Institute supports it.
William Clark, who practices corporate law in Philadelphia and said he has been working on benefit corporation law since its beginning, assured committee members there is no attempt to change corporate law.
"I don't think that this is a radical notion that's trying to fundamentally change our capitalist society," Clark said. "Frankly, I've been vested in our system all of my life. Republican governors have looked at this and signed it." As examples, he cited Jan Brewer in Arizona, Chris Christie in New Jersey, Bobby Jindal in Louisiana, and Nikki Haley in South Carolina.
According to a legislative summary of the bill, a benefit corporation "must include within its corporate purposes a general public benefit that has a material positive impact on society and the environment." That impact would be subject to a third-party review.
Specific public benefit purposes could include providing beneficial products or services to low-income or underserved individuals or communities; promoting economic opportunity beyond creation of jobs; preserving or improving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; and increasing the flow of capital to entities with a public benefit purpose.
An existing company would need a 90 percent vote of shareholders to transform into a benefit corporation. If that took place, those voting against the conversion could withdraw their money and leave the corporation.
"I'm very supportive of this bill," said Rep. Rick Glazier, D-Cumberland. He said it would "fill in gaps where government no longer can or should go" and give the private sector more self-responsibility.
Rep. Leo Daughtry, R-Johnston, said corporate leaders "are charged to maximize the pecuniary benefit of the stockholders. That's your main job." A benefit corporation would allow them to pursue socially worthy missions without being subjected to lawsuits from stockholders, he said.
"South Carolina just did it, and they are pleased, and they are creating new jobs, he said.
Rep. Jason Saine, R-Lincoln, wondered whether a benefit corporation is "a back door for corporations to use profits to be more politically active."
Rep. Paul "Skip" Stam, R-Wake, said, "Under recent U.S. Supreme Court decisions, any corporation can" be politically active, even for-profit ones.
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