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Review of Five Socially Minded Legal Forms for Companies

May 30, 2012 Add Comment Edit

There are a host of different legal options and requirements for companies who wish to be socially engaged. As reviewed in a May 25 Forbes article, here is a summary of five legal forms available to socially-minded companies. They include Benefit Corporations, California's Flexible Purpose Corporations, Maryland Benefit LLC, L3Cs and B Corporations:

1. Benefit Corporations

This is a new class of corporation, pioneered by the Berwyn, Pa-based nonprofit B Lab. B Lab is a nonprofit organization dedicated to using the power of business to solve social and environmental problems. It is already law in seven states most recently Illinois and Louisiana. This legislation mandates that companies and their boards take into account public benefits that impact society and the environment when making decisions. These companies also have to issue an annual third party audit report that addresses their social and environmental goals. The goal is to give companies legal protection to take certain steps that benefit their non-financial objectives, even if it’s not so good for the bottom line. It is also reassuring to shareholders who are looking for greater corporate responsibility from the companies they invest in.

For more information on Benefit Corporations click here.

2. California's Flexible Purpose Corporations

This was passed into law in California last October. Flexible Purpose Corporations also allows for Benefit Corporations. Flexible Purpose Corporations, unlike the Benefit variety, don’t have to meet general public benefits. Instead, they can specify at least one “special purpose”–addressing environmental sustainability, for example, or building a park. So the social focus is a lot more narrowly defined than it is with Benefit Corporations. Ultimately, the Flexible Purpose is designed for larger, more traditional companies that want to consider matters other than the financial bottom line, but aren’t “mission driven at their core,” according to Heather Van Dusen, a senior associate at B Lab.

For more information about Flexible Purpose Corporations click here.

3. Maryland Benefit LLC

In addition to allowing for Benefit Corporations, Maryland also permits companies to do the same thing but as a Limited Liability Company. That way, businesses already registered as LLCs don’t have to convert over to a corporate structure. The designation was created by legislation signed on May 19 by Gov. Martin O’Malley. The new law protects benefit LLCs from lawsuits by their members if they make decisions that put the environment, community, or social causes over making a profit. It is aimed at firms that want to make social activism part of their corporate mission.

For more information about Maryland Benefit LLC click here.

4. L3Cs

They’re low-profit limited liability companies with a charitable or educational purpose. There are about 600 such companies in nine states. Proponents created L3Cs to be entities that can be treated as Program Related Investments (PRIs) by foundations. By law, foundations have to direct 5% of their assets to charitable purposes every year. They can do that through PRIs, as long as the organization they’re investing in has a charitable or educational purpose and doesn’t include making a profit as a significant goal. Plus, for-profit investors can put money into an L3C and, as a result, companies potentially can attract considerably more funding. Foundations have been slow to adopt PRIs. But, with new rulings from the IRS, that could change soon.

For more information about L3Cs click here.

5. B Corporations

This isn’t a corporate structure, even though that word is in the name. It’s a certification from B Lab, which rates triple-bottom-line companies. (Think of Fair Trade USA, which certifies Fair Trade companies). Started in 2007, there are now 530 such businesses. Ratings cover five areas–society, environment, employees and so on–with 130 to 180 factors depending on company size and industry. Businesses have to score over 80 out of a total of 200 points. There also are unannounced audits of about 10% of all certified companies every year.

For more information about B Corporations click here.

© 2012, Richard Matthews. All rights reserved.

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November 27, 2010 Add Comment Edit

Social capitalism is a new market-based economic system. It addresses the problems inherent in both capitalism and socialism. Traditional capitalism often overlooks human and environmental interests and the central planning of traditional socialism impedes a rational allocation of resources.

In social capitalism, governments create greater profit opportunities for entrepreneurs by investing in desirable future industry and technologies (like rewable energy).

The essence of social capitalism is that markets work best and output is maximized through sound social management of the macroeconomy. Social capitalism posits that government regulation, and sponsorship of markets, can lead to superior economic outcomes.

Government investment in the green economy or securities regulation are examples of social capitalism. Regulation should be as limited as possible, however, regulation is needed to ensure that individuals and corporations do not exploit markets for personal gain at the expense of market growth, economic stability and environmental sustainability.

For business, social capitalism is the ability to create positive, healthy development. Businesses practicing social capitalism give back to society while creating an environment that is conducive to profit maximization.

Social capitalism is not hostile to free markets or the private ownership of property. Instead, social capitalism recognizes the unique success of capitalism, particularly under appropriate social supervision. Social capitalism thus seeks to create a balanced approach to business and the role of the state, with a view to optimizing the business environment for maximum sustainable economic growth.

The Business of Earth Hour and the Power of Social Media

March 26, 2010 5 Comments Edit

Earth Hour is the world's largest event calling for action on climate change. This Saturday 27 March at 8.30 PM (local time), businesses will join people all around the world to turn off their lights for one hour to show that solutions to the threat of global warming are possible through collective action.

Earth Hour started in 2007 in Sydney, Australia when 2.2 million homes and businesses turned their lights off for one hour to make their stand against climate change. In 2008, Earth Hour had become a global sustainability movement with more than 50 million people across 35 countries participating. Global landmarks, including the Golden Gate Bridge in San Francisco, and the Colosseum in Rome, went dark, as a symbol of hope for a cause that grows more urgent by the hour.

In March 2009, hundreds of millions of people around the world took part in the third Earth Hour. Over 4000 cities in a record setting 88 countries switched off their lights for one hour to pledge their support for the planet.

This year, 92 countries have already made the pledge for Earth Hour to show the world what can be done to fight climate change. This year promises to be the biggest and best Earth Day in the event's short history, proving that environmental issues are able to unite people from all continents and every walk of life. The success of Earth Hour is not only due to the prescience of the climate change issue, it is also due to the power of social media.

Earth Hour has relied on social media to communicate its message to millions of people, businesses and organizations around the world. They employ all the major social networking sites including, Twitter, YouTube, Facebook, and My Space. At the WWF Earth Hour site you will also find tools for blogs and webpages.

Earth Hour underscores the importance of socially responsible business and the growing importance of cause marketing. In the wake of the recession, the need for greater efficiency and the widespread consumer support for the environment make sustainability an unavoidable bottom line issue. Businesses that incorporate sustainable practices are afforded some priceless PR. Many businesses know this and consequently they are increasingly eager to get involved with environmental events.

The big brands participating in Earth Hour this year include IKEA, HSBC, Canon, Hilton. To get your business involved, register to join Earth Hour and download the Blueprint for Businesses and Corporations. Here are a few simple steps you can take to help reduce your business's impact on the environment:

Replace incandescent light bulbs with fluorescent ones.
Buy reusable dishware to reduce waste.
Start recycling and ask employees to participate.
Organize community service days for employees to clean a park or public space.
Subscribe to online newspapers to reduce paper waste.
Teleconference, instead of commuting to meetings.
Turn off the lights when they are not needed.

Earth Hour welcomes inquiries from businesses that would like to know more about how they can support Earth Hour. For more information email Earth Hour at contact@earthhour.org.

Earth Hour is also a good opportunity to call for comprehensive energy and climate legislation in the US. Because the US accounts for one quarter of the world's economy, American legislation is crucial to the welfare of the planet and it inhabitants. Despite President Obama's earnest support for climate and energy legislation, we have yet to see a vote in the Senate (although an early version of a climate and energy bill passed in the House last year).

Pledge your support and don't forget to turn off your lights for one hour, Earth Hour, 8.30 PM, Saturday March 27, 2010.
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Next: China Participates in Earth Hour

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Review of Five Socially Minded Legal Forms for Companies

Social Capitalism

The Business of Earth Hour and the Power of Social Media