If benefit corporation law would allow companies to look after the environment the same way they do their profits, why would anyone oppose such a bill to pass?
“There’s a lot of question about the intent and whether there’s really a need for this new classification,” said Michigan Chamber of Commerce President and CEO Rich Studley.
The benefit corporation bill has been drawing opposition in Michigan over fears that this new class of corporation will be a marketing tool to make other forms of for-profit businesses look greedy.
Companies that organize under the benefit corporation legislation will be allowed to pursue profit and create social benefit and environmental impact as part of their fiduciary duty. These interests remain should ownership change. Shareholders are forbidden to sue a company over the sacrifice of profits for social or environmental gains.
This class of corporation would require companies to publish an annual Benefit Report highlighting social and environmental impact. Benefit corporations are treated similarly to other corporations for tax purposes.
Rep. Vicki Barnett, who introduced House Bill 4615 and 4616 in Michigan a year ago, told Crain’s Detroit Business she does not understand the concerns.
According to Barnett, it is not the first time Michigan added new corporate structures as it saw needed: professional corporations in 1962, nonprofit corporations in 1982, limited liability company in 1993, and low-profit limited liability company in 2008.
Barnett adds that young entrepreneurs do not follow the old model where social benefit is kept separate from the corporate structure. The opposition on benefit corporations is not going to stop them from creating a new model of business.
Another concern arises from a third-party certification called B Corporation that would audit how socially or environmentally beneficial a company’s business practices are, and charge them an annual fee of $500 – $25,000 (depending on annual sales) for the certification. Some see this recognition as a conflict of interest.
Others believe that the passage of the legislation would mean that a company not under the benefit corporation class would be deemed as a company who does not care about their communities, even when they do. There is also the pressure that they should be reorganizing as benefit corporations when it may not be suited for their business. These concerns highlight a wider issue outlined by major corporations at the Skoll World Forum – that climate change, water scarcity, poverty, and other pressing problems call on the need for creating sustainable, responsible business as the norm and not just something done for reputational purposes. The benefit corporation law may very well prove to be just a tool to move towards an ideal.