An Epic Tale: The Birth of the Benefit Corporation
By Alison Klein | May 25, 2016
SPEAK, MEMORY – Of the cunning hero, The wanderer, blown off course time and again
After he plundered Troy’s sacred heights…
Okay – this story doesn’t actually begin with the same lines as The Odyssey. It does, however, contain epic deeds, scary behemoths and a legendary hero (of sorts).
On May 11, the B Local: Mid Atlantic steering committee hosted an exciting event in partnership with the Montgomery County Green Business Certification Program. Besides being a lot of fun, Benefit & B Corporations: Taking Stock + Taking Charge offered attendees valuable insights into the formation and state of the B Corp and Benefit Corporation movements.
There’s no doubt that the idea of the Benefit Corporation is gaining momentum. At this point, legislation permitting this form of incorporation has been passed in 30 states and the District of Columbia. Internationally, legislation has been passed in Italy and Puerto Rico and work is underway in Chile, Colombia, Australia, France and Canada.
You probably know the difference between a B Corp and a Benefit Corporation, but do you know how the whole idea for Benefit Corporations came about?
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Our featured speaker for the evening was Maryland State Senator Jamie Raskin, the man legendary hero who introduced the very first piece of Benefit Corporation legislation and the Democratic candidate currently in the running to represent Maryland’s 8th congressional district in the U.S. House of Representatives. Senator Raskin recounted the story of how he and B Lab Co-Founder Jay Coen Gilbert recognized the need for the Benefit Corporation and plunged fearlessly into the legislative fray to make the idea a reality.
Please note that the transcript that follows is abridged and edited for readability. Click here to see the full, unabridged transcript.
Jamie Raskin’s Remarks at “Benefit & B Corporations: Taking Stock + Taking Charge”
I’m very proud to have played some role in helping give birth to what has become a huge national movement. With 30 states and the District of Columbia passing legislation, a majority of the states in the Country now have Benefit Corporation laws, and it’s spreading to foreign lands as well.
There are some people in the room who also figure into this story. The year was 2010 and from one perspective it was an exciting year for me legislatively – I’d introduced the Marriage Equality legislation as well as legislation to abolish the death penalty in Maryland.
We were making great strides there and I felt things were going very much in the right direction. But at the same time, in the economic life of the country, I thought things were headed in a very, very bleak direction because of three catastrophic corporate events that took place in 2010:
- One was the Upper Big Branch mine collapse disaster in West Virginia, which cost 29 coal miners their lives. That was courtesy of the Massey Coal Corporation whose president and CEO, Don Blankenship, later went to prison for openly defying hundreds of regulatory and court orders to correct mine safety violations.
- The second event was the BP oil spill, which pretty much wrecked an entire ecosystem, poisoning the Gulf of Mexico in the age of climate change. This catastrophe was courtesy of the BP oil corporation.
- The third and the biggest event was, of course, the fallout of the subprime mortgage meltdown which cost the American people 19 trillion dollars in retirement income, real estate values, mortgage foreclosures and on and on and on, as well as job losses and rising unemployment.
So it was a very tough time in terms of these corporate catastrophes and logically the politics of the country should have focused on how to rebuild some regulatory fences around the corporations.
But because of another gift of 2010, the Citizens United decision in the Supreme Court, large corporations funded the Tea Party which suddenly made regulation the villain in American politics. That then led to the terrible electoral wipeout in the 2010 elections in which the Tea Party essentially seized control of the wheel of power in Congress.
So one day I invited my friend Jim Epstein to go for a walk and I just said: “You know, this is like a really dark picture that we’re in here.” I said I knew that there were progressive businesspeople out there as well as green businesses trying to move in another direction, but that the chamber of commerce at the national level and corporate America generally seemed to be directed and controlled by large corporations acting in a completely lawless and antisocial way.
And then Jim told me about the B Corporation movement and I started asking him more and more. I expressed interest in seeing whether we could formalize and legalize this “business as a force for good” approach.
Jim put me in touch with Jay Coen. I asked him: “Do you have a plan to actually try to take what you’re doing with B Corporations and make it a new legal form to try to invite businesses? To give them a new legal identity and social function beyond just the maximization of profit?”
The maximization of profit function had been formalized a century ago in 1919 in the Dodge v Ford case where the Supreme Court basically interpreted corporate law to mean that maximization of shareholder value (i.e. profit) is the dictating, overriding imperative of corporate law.
And they said yes, we’ve got a 10 year plan for how we might actually get this legally recognized. And I said “Well how about a 10 week plan, because I’m going back to Annapolis and I would like to introduce a Benefit Corporation law to give the corporations the opportunity to create another identity and another method of operating.“. . .
So with the help of B Lab we drafted legislation to say that corporations should be able to build into their DNA – into their incorporating documents – a commitment to a social function, a social purpose, a material positive impact on society beyond moneymaking. And the corporation would hold itself responsible for that social purpose, both through accountability to its shareholders and through regular reports through a third party entity like B Lab.
We got surprising support from across the political spectrum. Of course everybody wanted to make sure that there weren’t subsidies built into it, that there weren’t tax breaks built into it. But it was both a branding mechanism and also a form of legal protection for the company. The shareholders and the executives would be protected against lawsuits and derivative litigation brought against them for acting in the interests of the broader good as opposed to just maximizing shareholder value.
And so we introduced the legislation in 2010, we went through some very rigorous hearings, and we passed it in 2010. In the intervening six years we’ve seen a majority of the states pass similar legislation, so this is an extremely rapid growth social movement that you guys are part of here, and its also urgently necessary.
One way of thinking about the politics of 2016 in the presidential election it is you have a left-wing critique of corporate capitalism embodied in the Bernie Sanders campaign, which has enormous resonance and traction for millions of people. You have a right-wing, authoritarian critique of corporate capitalism from Donald Trump and the Republicans which also has enormous resonance and traction, and you’ve got the Clinton campaign which is implicitly defending the possibility of some reform and progress within the current corporate model.
But really what the country is looking for is you guys and the Benefit Corporation movement [APPLAUSE]: a movement for responsible green social capitalism corporations that are rooted here and invested in our communities. Corporations that are willing to send the signal to their workers, to their consumers, to the investors and the broader society that they are invested in the community and are willing to be held accountable by the highest social standards there are.
We have to ask ourselves if we’re willing to reward those companies with our consumer dollars and with our investment and with our loyalty and our faith as a community instead of supporting corporations who want to take the money and run and go invest it in the islands or Switzerland or wherever they go. We want to be invested right here.
I’m proud that I am not only a senator for but a consumer of two – I think the two first – Benefit Corporations on Earth: Big Bad Woof – and Pennye [Jones-Napier] is here today [APPLAUSE] And then my dear friend Tebabu Assefa, from Blessed Coffee in Takoma Park, he’s here too.
I’m very proud to have played just a tiny little role in this movement, but if all goes well in November I’m going to be going to Congress and the Benefit Corporation movement and B Corp movement will have a great legislative champion in the Congressperson from the 8th Congressional District of Maryland.
Do you have another epic story of changemaking our readers might enjoy? Add a link in the comments below!
*When first published, this article incorrectly stated that Benefit Corporation legislation had been passed in Chile, Colombia, Italy, Australia, France and Canada. Outside of the US, legislation has only been successfully passed in Italy and Puerto Rico. Efforts are underway in the other countries mentioned.