The Corporate Law Group

Benefit Corporations

Delaware is enacting new Subchapter XV in its corporate laws to allow so-called Public Benefit Corporations.  California did this in 2012.  Not to be confused with nonprofit public benefit corporations, they are for-profit but allow business to be conducted for reasons other than maximizing profits.  Delaware is the 19th state to allow these and the legislation is expected to become effective as early as August 1.  Benefit Corporations supposedly allow for-profit corporations to focus on things other than profit without fear of shareholder litigation.  It seems to us that they always have been socially responsible, but to those not paying attention or already indoctrinated in the corporations-are-evil school, maybe this makes them feel better.  They haven’t gotten a ton of traction yet but they could.  Any responsible business person is going to consider all of the social, environmental, employment, and other ramifications of their business’ impact on its community and I would argue those kinds of concerns are allowable in typical for profit corporations anyhow.  These Public Benefit Corporations are kind of the flavor of the month.  How many companies stopped doing business with South Africa due to its policies of apartheid?  How many were successfully sued for passing up those filthy South African rands?  The government nannies would always have you believe that unfettered business will always take the low road, but there is no evidence of that.  Henry Ford raised salaries not because of a mandate or regulation; he did it because his assembly line innovations made it possible.  Most successful businesses really care about their employees.  No one who cares about their employees are going to make less desirable their employees’ communities.  Anyone who says differently is ignorant.  Sure, there are bad apples but the market weeds them our far faster and far more efficiently than some rule. 

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