The Benefit corporation
Changing the Rules of the Game: A Solution to the BP Problem
BY FC EXPERT BLOGGER JAY COEN GILBERTWed Jul 7, 2010
Herer is an excerpt from this very insightful blog from Jay Coen Gilbert - it was on FastCompany.com yesterday.
Wall Street caused the BP disaster. Short-termism is the problem. The Benefit Corporation is a solution.
The Old Rules
For public companies, decisions are driven by the quarterly earnings call. Meet the numbers, keep your job. Beat the numbers, collect your bonus. The rules of this game are stunningly simple. And they are backed by the force of law.
U.S. corporate law states that the legal obligation of the directors and officers of a company is to serve the interests of shareholders. Period.
The New Rules
We can't change outcomes until we change the rules of the game. Fortunately, Maryland Governor Martin O'Malley and Vermont Governor Jim Douglas have done exactly that. Both signed into law this spring legislation creating a new class of corporations accountable to serve society as well as shareholders. It's called a Benefit Corporation.
Directors and officers of Benefit Corporations are required by law to consider the impact of their decisions not only on shareholders, but also on their workforce, community, and the environment. This gives them the legal protection to tell those disembodied voices on the quarterly earnings calls that there are limits to what sacrifices will be made at the alter of more-money-now. The Benefit Corporation relieves the pressures of short-termism that drive bad decisions that affect the rest of us.
