Today, or so the conventional wisdom goes, if you have a compelling issue and a laptop, you can influence people and win hearts and minds in the process. Hence the rise of online advocates, such as Change.org, who run campaigns for groups like Amnesty International for a fee. See the related article in the Washington Post. In Change.org’s case, the general public can create online petitions for free and get help and visibility for their campaigns.
Change.org was originally conceived as a nonprofit, but now it and other companies with a social purpose, e.g., Patagonia Inc., are part of a new and emerging group of “benefit corporations.” What are these corporations and how will they affect us in the future?
The “benefit corporation” model is a new way of doing business that seems to sit between a charity and a corporation. In a way, it is a business model that seems to be adapted to social entrepreneurs and although it just started in the U.S., chances are that it will spread elsewhere.
About two years ago, faced with a growing demand, legislators in seven U.S. states allowed companies to organize as “benefit corporations,” which allowed a company's governing board to consider social or environment objectives ahead of profits. This legal structure is intended to shield the board from investor lawsuits.
According to the Wall Street Journal, some proponents of the benefit corporation believe its biggest value may come at the time of the sale or breakup of a business, because directors might be able to consider factors other than maximizing shareholder value. The article suggests that if benefit corporations existed in 2000, the board of Ben & Jerry’s Homemade Inc. may not have agreed to its sale to Unilever. That said, the benefit corporation concept also has its share of critics who believe that the structure actually creates a lack of accountability to investors.
Jamie Raskin of the Nation notes, “When America began, the states chartered corporations for public purposes, like building bridges. They could earn profits, but their legitimacy flowed from their delegated mission. Today, corporations are chartered without any public purposes at all. They are legally bound to pursue a single private purpose: profit maximization. Thus, far from advancing the common good, many for-profit corporations have come to defy the law, corrupt the officials charged with enforcing it and inflict harm on the public with impunity… We need a new business model inspired by the old one. Corporations should again come to bolster democratic purposes, not thwart them…”
It remains to be seen whether these new benefit corporations will engender lasting social change.
Picture credit: flickr user ZeRo ‘SKiLL