Public benefit corporations are companies that are legally required to pursue social or environmental goals in addition to their goals of maximizing profits. They have grown in popularity because they offer businesses a way to incorporate their values into their corporate culture.
These companies are required by law to disclose information about their operations and their impact on their stakeholders. Some states require public benefit corporations to release benefit reports to show their environmental and social impacts using a credible third-party standard. Ideally, public benefit corporations focus on aligning their mission and profits.
How Public Benefit Corporations Preserve their Mission
Besides making profits, a public benefit corporation should ensure it preserves its mission by:
- Providing extra options when deciding about selling or liquidation
- Introducing management improvements and capital increments
- Preparing a company to focus on its mission after becoming public
Public Benefit Corporation Businesses
Benefit corporations comprise various types of businesses since the first legislation in 2010 allowing the formation of public benefit corporations. The benefit corporations currently cover retail, service, manufacturing, tech, and food and beverage companies. They are also available in many small businesses and major brands.
Are Public Benefit Corporations Nonprofits?
No, public benefit corporations are not nonprofits. This is because, besides their goals for society and the environment, they have other goals for their shareholders of maximizing profits. Therefore, for-profit companies consider the company’s mission, morals, stakeholders, and profits.
Public Benefit Corporations Options When Selling
A public benefit corporation has more sale options like:
- Evaluating various elements besides value when deciding whether to sell and who to sell to
- Retaining or relinquishing its benefit corporation standing after or before selling based on the preferences of the present and new proprietors and two-thirds of shareholders by vote
- Encouraging competitors on mission dedication and value
Can Public Benefit Corporations Go Public?
Yes, they can. The implementation of the benefit corporation category was to protect a company’s mission when going public. Therefore, there are no restrictions on these companies going public.
On the other hand, the public benefit corporation is an attractive investment opportunity as corporate social responsibility becomes more prominent. This means that more benefit corporations will begin to go public. However, once public shareholders are allowed to start investing in the corporation, it may become difficult for the company to maintain its non-financial mission. This is mostly because the new investors may not share the same vision as the owners and founders of the corporation.
How do Public Benefit Corporations Protect their Shareholder’s Interests?
Public benefit corporations are no different than the corporate model in protecting their shareholders’ interests. This means that shareholders hold the normal governance rights of a company, like voting on mergers and other company transactions, amendments, and elections of directors. In addition, conflicts in transactions must undergo a fair evaluation to ensure that administrators don’t focus on their personal interests at the expense of the shareholders’ interests. In lawsuits, third parties can’t sue a public benefit corporation without being granted by the shareholders.
Public benefit corporations are legal structures that consider social purposes in addition to the interests of shareholders to maximize profits. Accordingly, they are an attractive vehicle for any company seeking to incorporate its values into its practices to impact the environment and society while maximizing profits.