An Occupy Wall Street flyer urges people to “shut down the corporations” with the sophomoric rationale that to shut down corporations is to “create a society that is organized to meet human needs...” Meanwhile, the once venerable Forbes magazine asks the question, “Is Obama a Socialist?” only to answer, “Yes, Obama is a Socialist.” Somebody should lock these people in a room together. The bickering distracts from the real problem: single-minded corporations.
California has the answer. Earlier this month, the Golden State introduced benefit corporations into law. B corps are a new corporate structure that give corporations legal protection to act in socially conscious ways.
Traditional shareholder companies have a legal mandate of fiduciary representation. Shareholders give money to an organization with the expectation that the corporation will use the money to create more money through rising share prices and increasing revenue. Shareholders can sue if they think their money gets misused.
The threat of lawsuits guide how corporations function. Apple, the darling company of the altruistic minded, maintains $30 billion cash-on-hand at any one time. As does the much vilified Chevron. Both companies have enough money to pay out livable wages for contract workers and limit environmental hazard, but neither does.
Suicides at Foxconn, the contract manufacturer that produces Apple’s iPhones and iPads in China, and Chevron’s destruction in Ecuador are signs of hiring lowest bidders--a practice good for profits.
However, shareholders do sue. Bank of America is being sued for destroying profit through bad mortgage handling. Hewlett-Packard is being sued for discontinuing its tablet computer. Indeed, even the venerable Ben and Jerry’s had to accept an offer to sell the company to the conglomerate Unilever out of fear of shareholder lawsuits.
The new California law, Assembly Bill 361, gives permission to corporations to use revenue for social good, which limits liability from litigious shareholders. Corporations with this structure can select social causes to have an active hand in, or they can be generally duty-bound to consider all stages of their impact on the earth and its population. The B corp, then, has a triple bottom line: people, planet and profit. Instead of just, well, profit.
A B corp is, in essence, a legal statement that takes away profit as the first priority for corporations. Profit is put second to, or at the same level as workers’ rights, the environmental impact of doing business, and ethical labor sourcing. Traditional corporations are legally bound to put profit first, even if doing so comes at the cost of child labor or environmental destruction.
Extreme Libertarians will be sure to hate this bill. They should be locked in the aforementioned room as well. California is the seventh state to pass B corp legislation, the first being Maryland less than two years ago. Arizona has no such B corp legislation, which is a shame because allowing companies to make profit and pursue social good is the natural evolution of corporations in the Humanist age. Legislation to allow traditional corporations more freedom to act with social awareness will create more business opportunity, which will create more profit.
Keep the ideologues locked up. It’s time to let entrepreneurs get to work.
Reach the columnist at whamilt@asu.edu.
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