Building Social and Environmental Responsibility into your Business and Legal Career Carolee Rigsbee, PhD Celeste Hammond, JD
1 Survey of adults in United States Chatterji & Toffel (2018)
2 U.S. Business Roundtable (Aug 19, 2019) “Business Roundtable Redefines the Purpose of a § Corporation to Promote ‘An Economy That Serves All Americans’”
Question Have you heard about “benefit corporations” before?
Benefit Corporation Benefit Not for Profit Corporation Corporation Charity For Profit 1 st started in Maryland in 2010 • Illinois statues, January 2013 (ILCS, 2013) • Now 36 states (5 in progress) (BLab, 2020b) • Model Benefit Corporation Law (MBCL) vs. Delaware forms (Alexander, 2018) •
Benefit Corporations in Illinois: Creating public benefits Illinois: Benefit corporation must create a “specific public benefit” § Could be for a range of purposes (ILCS, 2013): “(1) providing low-income or underserved individuals or communities with beneficial products or services; (2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business; (3) preserving the environment; (4) improving human health; (5) promoting the arts, sciences or advancement of knowledge; (6) increasing the flow of capital to entities with a public benefit purpose; or (7) the accomplishment of any other particular benefit for society or the environment.” 5
Benefit Corporations In Illinois § Increased mission protection - e.g. from mergers & acquisitions Board directors required to consider effects of the organization’s § activities on broad set of stakeholders Social and environmental responsibility evaluation by a “third-party § standard” Annual publication of report – selectivity of topics reduced § 6
Core Issue: Awareness 7700+ benefit corporations in US (Berry, 2018); ~66 in Illinois (B Lab, 2020b) § Not a lot of professionals currently know about this form of incorporation or § understand it well: Survey of law and accounting professionals (practitioners/teachers) in Illinois – suggests about 75% have no or little knowledge of benefit corporations (Rigsbee, Jessup, Hammond, Wasik, & Black, 2020) Business innovation is not only about the products and services we offer; it must § include how we organize and manage business (e.g. benefit corporation use as means to reduce drug prices (Fisher et al., 2019)). 7
Why this is important Benefit corporation laws fill a void: the need for protection for for-profit • firms that have a social mission à Needs to be understood Concerns about the laws (e.g. protections) and accounting practices • surrounding benefit corporations need to be known à Proactively improve state laws, create greater efficiency and consistency in enacting best practices. Public policy decisions regarding privatization - financing major tech, • infrastructure, water, and energy projects intended to support sustainable natural resources à privatization through benefit corporations should be a strategy on the table 8
Opportunities for you Research opportunities § Apparent sparsity of literature on the topic in the accounting field (Benson, – Thomas & Burton, 2018; Weber & Pippin, 2016) and Arguments in the legal field for and against the “benefit corporation” form – of incorporation (Alexander, 2018). Implications for business and their professional advisors § Public policy implications § 9
Learn more – suggested references Alexander, F. H. (2018). Benefit Corporation Law and Governance. § Berrett-Koehler Publishers Inc. Oakland, CA. § B Lab. (2020d). What is a benefit corporation? Available at https://benefitcorp.net/what-is-a-benefit-corporation B Lab. (2020a). Certified B Corporation Certification Requirements. § Available at https://bcorporation.net/certification/meet-the- requirements 10
Contact Information § Carolee Rigsbee crigs2@uis.edu § Celeste Hammond 7hammond@jmls.edu 11
References Alexander, F.H. (2018). Benefit Corporation Law and Governance. Berrett-Koehler Publishers Inc. Oakland, CA. Benson, S.S., Thomas, P.B. & Burton, E. J. (July 1, 2018). The CPA’s role in forming benefit corporations. Journal of Accountancy. Available at https://www.journalofaccountancy.com/issues/2018/jul/public-benefit-corporations.html Berry, E. (2018). Social Enterprise Law in Action: Organizational Characteristics of U.S. Benefit Corporations. Transactions: The Tennessee Journal of Business Law, (20), 21-114. B Lab. (2020a). Certified B Corporation Certification Requirements. Available at https://bcorporation.net/certification/meet-the-requirements B Lab (2020b). Find a benefit corporation. Available at https://benefitcorp.net/businesses/find-a-benefit- corp?field_bcorp_certified_value=&state=Illinois&title=&submit2=Go&sort_by=field_bcorp_state_value&sort_order=D ESC&op=Go&page=2 B Lab. (2020c). State by State Legislation. Available at https://benefitcorp.net/policymakers/state-by-state-status B Lab. (2020d). What is a benefit corporation? Available at https://benefitcorp.net/what-is-a-benefit-corporation
References Chatterji. A. K.& Toffel, M. W. (2018). The New CEO Activist. Harvard Business Review (Jan-Feb). Available at https://hbr.org/2018/01/the-new-ceo-activists Fischer, A., Dewatripont, M., & Goldman, M. (2019). Benefit Corporation: a path to affordable gene therapies?. Nature medicine , 25 (12), 1813-1814. ILCS (2013). Illinois General Assembly. Business Organizations (805 ILCS 40/) Benefit Corporation Act. Available at http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=080500400HArt%2E+5&ActID=3419&ChapterID=65&SeqSt art=1700000&SeqEnd=-1 Rigsbee, C., Jessup, C., Hammond, C., Black, S., Wasik, J. (2020). Benefit Corporation Awareness. 2020 Sustainability, Ethics, and Entrepreneurship Conference (February 27-March 1, 2020), San Juan, PR. U.S. Business Roundtable. (2019). Our commitment. Available at https://opportunity.businessroundtable.org/ourcommitment/ Weber, J. L & Pippin, S.E. (August 2016). Benefit Corporations and B Corporations: New opportunities for accountants. The CPA Journal. Available at https://www.cpajournal.com/2016/08/01/benefit-corporations-b- corporations/
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