Philadelphia partner Bill Clark was featured in Washington Business Journal, Phoenix Business Journal, New Mexico Business Weekly, and Lehigh Valley Business for his role in creating a new type of business entity known as a benefit corporation.
The new benefit corporation form redefines the fiduciary duty of the directors of such a corporation requiring them to take non-financial interests into consideration when making decisions for the corporation.
The Washington Business Journal reported that the D.C. Council had preliminarily passed benefit corporation legislation for the District; and that the Benefit Corporation Act would be up for a final vote on Dec. 18.
The D.C. legislation was subsequently passed as the article predicted. Bill explained that the concept has attracted a wide variety of businesses across the country, including law firms, accounting firms, manufacturers and retailers. The article notes that Bill has been an architect of the movement and helped draft all the benefit corporation statutes that have been enacted thus far, including D.C.'s bill.
The Phoenix Business Journal reports that the legislation is scheduled for consideration in Arizona. Bill explained that he became involved in the movement when a former client started an organization called B Lab, which developed a way to evaluate the social and environmental performance of a business. It was dubbed the B Impact Rating System. Development of the project indicated that even in those U.S. states that permit the directors of a company to consider interests other than those of the shareholders, directors were not required to consider the other interests. “In addition, U.S. corporation law generally is based on the notion that the value of a business should be maximized for the financial benefit of its shareholders,” said Bill.
He said that he discussed the concept with the founders of B Lab and determined that "U.S. law should permit companies to make a commitment to further the interests of society and the environment," so he drafted the legislation.
The New Mexico Business Weekly article notes that New Mexico State Sen. Tim Keller plans to introduce a bill in the January legislative session to allow New Mexico companies to register as benefit corporations; Keller says he will have bipartisan support for the effort.
Bill told the New Mexico Business Weekly that the laws “redefine the duties of directors” of corporations and allow them to change the purpose of the corporation. “Under current laws, corporations are required to give an annual report that describes the [firm’s] financial performance. The notion for a benefit corp is to provide a benefit report” as well, he said.
He added that allowing firms to elect the benefit corporation form will prevent “greenwashing,” a situation where companies say they act in a socially responsible manner but don’t. Companies “want to get the marketing benefit” of being socially responsible “without following through. That’s why the report becomes so important. You have to follow through and let the world know what you have done,” he said.
An op-ed in Lehigh Valley Business notes that the passing of the legislation in Pennsylvania means that companies will no longer be required to put profit before people or the planet. The article notes that Berwyn-based B Lab worked with Bill to draft the original model. It described the model as a “fundamentally simple solution to the laggard idea that only charities do good work while only corporations make money.”
To read the Washington Business Journal article, click here.
To read the Phoenix Business Journal article, click here.
To read the New Mexico Business Weekly article, click here.