A bill that would allow companies to charter themselves as benefit corporations, or B-Corps, cleared the General Assembly last week and now heads to the governor’s desk.
B-Corps are for-profit companies that have chosen to make a set of values equal in importance to the overall profitability of the company.
These companies have the ability to more positively impact their communities and create a new incentive structure to encourage corporate activism, said Rep. Gordon Denlinger, R-Lancaster County, the sponsor of House Bill 1616.
“B-Corps direct the entrepreneurial drive of American businessmen and businesswomen to aggressively address social and environmental problems without the waste and procrastination that often plague government programs that have similar goals,” Denlinger said in a statement.
This new business class would reclassify the fiduciary duties of corporation directors, allowing them to take nonfinancial interests into consideration when making decisions for the corporation, according to the proposal.
Currently, other corporation classes must make decisions based exclusively on maximizing profits. Under the new corporate classification model, B-Corps could not be held liable for lost monetary value as a result of socially conscious decisions.
“By expanding a corporation’s legal structure to allow directors to make decisions for the good of society, and not just to maximize shareholder profits, consumers are able to support businesses that align with their values,” Denlinger said.
The process of becoming a B-Corp is entirely voluntary and based on shareholder desire, according to the bill. If a business opts to go that route, it must provide yearly disclosures of the public benefit efforts the company has undertaken to shareholders.