Last year, I asked my colleagues at area board governance events what they thought of the emergence of B (Benefit) Corporation legislation across the nation and most recently in California. I received blank stares. Now that 18 states - including Delaware, home to over half of all public corporations and the heart of the corporate governance judicial system - have passed B Corporation laws, perhaps the governance field will wake up and note the oncoming train.
I have a draft of a status paper from 2012 which describes the history of B Corporations, which I will share in response to email requests.
What are the current and prospective issues that now must be addressed?
1. We already are seeing a decline in publicly listed companies and new venture IPOs. Will the increase in B Corps further exacerbate those trends by diverting investments (especially the burgeoning and largely unregulated social investments) away from traditional shareholder-benefit entities?
2. When will the ABA begin to take steps to develop a "uniform code" - a legislative standard that can be adopted by all states - much like the Uniform Corporate Code? Or will the legal profession simply sit by and watch states proliferate their own versions until such time as we realize we probably need a more standardized national version?
3. When will we determine that the certification by B Labs of Berwyn, PA Is something of a conflict of interest as they also serve as the primary advocate of B Corporations?
4. As we increase the number of B Corporations, what will be the mechanisms of consumer and business regulation? How will we prevent fraud at these firms with such blurred lines of accountability and the lack of legal precedent?
5. How can companies and boards serve multiple masters: shareholders and stakeholder groups, specifically employees, customers, suppliers, the community (which community, in fact?), local to global environmental interests, social, arts, and cultural entities?
6. Will shareholders invest in B Corporations in light of the dispersion of their "returns" among so many ill-defined entities?
7. Do B Corporations portend the de facto merger of non-profit and for-profit organizations? How well will B Corporations adopt financial controls required of public companies? Or will B Corporations simply persist below the radar of most major regulators?
8. What happens "at the end?" How will bankruptcies or mergers and acquisitions be handled? Will the "benefits" be transferred or eliminated? How will "benefit shares" be valued? How will investors convert their shares to later tiers of capital investment?
9. We know that B Corporations are particularly appealing to the Millennial Generation which has demonstrated strong aversions to profit-seeking. Is the B Corporation the beginning of their version of "don't trust anyone over 30?". Will B Corporations produce the salaries, pensions, growth that will sustain the Millennials through their productive years and onto retirement?
10. How will B Corporations, in combination with Crowd-funding, change the landscape of investment and - even more important - how will that combination manage incidents of financial fraud caused by naive investors being duped?
Passing a law enabling the formation of B Corporations clearly is the easiest part. Are the legislators, regulators, and professional organizations ready to take on the real challenges and consequences of their actions?