Making it legal but not too legal

As of January 2013, Massachusetts will enable companies to incorporate as Benefit Corporations. The Benefit Corporation movement in the USA aims to remove any legal boundaries that prevent companies pursuing their social and environmental goals. In brief, as set out in the Benefit Corporation White Paper, the characteristics of a benefit corporation are:

1. a requirement that a benefit corporation must have a corporate purpose to create a material positive impact on society and the environment
2. an expansion of the duties of directors to require consideration of non-financial stakeholders as well as the financial interests of shareholders
3. an obligation to report on its overall social and environmental performance using a comprehensive, credible, independent and transparent third-party standard

The idea for Benefit Corporations came from B Lab, a not-for-profit organisation that has developed a set of standards against which companies (rather confusingly referred to as B Corporations) could benchmark their corporate responsibility efforts, thereby demonstrating that they're not all talk. Through the development of its standards, B Lab found that companies were coming against a number of legal issues when they tried to move towards giving equal consideration to stakeholders as they do shareholders when making company decisions - 'historically, the U.S. legal system governing corporate entities and their activities has not 

been structured or tailored to address the situation of for-profit companies who seek to use the 

power of business to solve social problems'. The result was that some companies were scared of pursuing their social mission for fear of litigation for failure to maximize shareholder value. So the Benefit Corporation movement is calling on state authorities to provide a more flexible legal framework that enables companies to pursue social and commercial goals in equal measure. 

I'm interested that legal concerns have been such a barrier for American companies as this is not something that I've come across in Europe. Of course, aligning all stakeholders behind the social purpose and objectives of the business are always crucial in order to move forward but fear of the legal backlash if shareholders changed their minds or disagreed was not something we came up against - perhaps this is simply a reflection of the differences between European and US legislation. Anything that removes boundaries and gives the companies the freedom to innovate and compete to be 'better' is a good thing and the fact that it has got lots more people talking about the importance of shared value in the corporate world is positive. Just as long as it doesn't become too legal and by that I mean, stifling creativity and slowing momentum through the development of endless hoops for companies to jump through in order to meet a minimum - and ultimately rather uninspiring - standard of best practice. 

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