What is a Benefit (B) Corporation?

March 30, 2012

Thanks to the work of B Lab and its partners, corporations can now be protected from shareholder litigation in the name of profit maximization. Image courtesy of B Lab

Corporations are required to deliver the most profits they can to their shareholders. In most states, they must put their shareholders’ financial interest and bottom line above everything else, even the public good.

It wasn’t always that way. When corporations first came into being in the early 19th century, their reason for existence was to serve the public, not profit. Typical corporations were private-public partnerships that were chartered to build or create something that the government couldn’t do on its own, like build a bridge or an interstate railroad. But over time, through various changes in the law, the definition of a corporation evolved to what we have today.

Benefit “B” Corp certification is a new movement whose goal is to redefine what it means to be a successful business. The B Corporation law, which has been passed in seven states, allows businesses to pursue a “triple-bottom line”: profits and environmental and social benefits. A New York City-based nonprofit called B Lab is behind the movement. They drafted the legislation and offer a certification that works in the same way Fair Trade goods and LEED buildings are accredited.

There are over 450 certified B corporations from over 60 different industries in the U.S., Canada and the European Union, including companies like Patagonia, Warby Parker and Method cleaning products. To be certified, the companies pledge to meet comprehensive social and environmental performance standards, higher accountability standards and to build constituency for public policies that support sustainable business models.

PBS NewsHour‘s Paul Solomon reported on B Lab and B Corps earlier this year. Watch thevideo to learn more about these companies striving to benefit their shareholders and society.

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Learn more about the curious history of American corporations in the 2004 documentary, The Corporation by Mark Achbar, Jennifer Abbott and Joel Bakan, which is streaming for free on Hulu.

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