Good News: New York becomes 7th state to enact legislation for the new legal category of "Benefit Corporations"

On a day when the internet screams with (justifiably) scary stories about indefinite military detention for anyone anywhere (e.g., see this, as well as many previous articles on this site), I prefer to focus on where we want to go instead of where we’re afraid we’re going. In fact, I’d much rather place my attention on the long, winding, mountanous road ahead than stare at the abyss we could, at any moment, hurtle over.

Is that just because I’m an incurable Sagittarian optimist? No, it’s because I’m aware of the laws of manifestation.

Thanks to care2.com.

Care2 Success! New York Establishes Benefit Corporations

December 18, 2011

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Care2 Success! New York Establishes Benefit Corporations

Thanks in part to the many activists who signed this Care2 petition, a new law for New York authorizes establishment of benefit corporations with a dual focus on social responsibility and profits.

Governor Andrew Cuomo signed a law on Monday, December 12, creating a new legal category of company in New York : a Benefit Corporation. The companies that incorporate under the new law must prove they have social and environmental impact.

New York becomes the seventh state to enact the legislation, following Maryland, Vermont, New Jersey, Virginia, Hawaii and California.

Unanimous Bipartisan Support

The bill will go into effect in 60 days. Sponsored by Assembly speaker Sheldon Silver and state Senator Daniel Squadron, it passed with rare unanimous bipartisan support.

These companies, usually referred to as social enterprises, include clean technology companies that fight global warming with each solar panel sold, or a Fair Trade coffee company that fights poverty by buying directly from poor farmers, for example.

While officers and directors of existing companies are required to pursue profits on behalf of shareholders, sponsors say the new model envisions other fiduciary responsibilities meant to have a positive material impact on society and the environment.

For-Profit Companies Can Have More Social Impact

It is meant in part to address concerns among some entrepreneurs who need to raise growth capital but fear losing the social or environmental missions of their business.

From WYNC news:

Squadron argues the law will enable for profit companies to have more social impact. “Right now companies are handcuffed because they need to return the highest profit for investors and can’t also return social benefit for society” he said. “Under Benefit Corporations they will be able to…pursue a double bottom line of financial and social benefit.”

Benefit Corporations have a few key differences from traditional corporate forms, like the C Corp or S Corp, which require a company to maximize return to shareholders over any other goal, including environmental concerns.

Instead, Benefit Corporations will be required to consider in management decisions the impact on the environment, community and employees along with profit to shareholders. That gives a founder or CEO a legal defense against investor claims.

Subject To Third Party Monitoring

Benefit Corporations in New York will have to submit to third party monitoring on at least one kind of non-financial benefit they provide to society. The law does not mandate which cause or which third party certification organization, something that the New York City Bar association has raised concerns about because it could put corporate boards of directors in difficult positions.

The bill passes unanimously in New York’s House and Senate. We can only imagine when that might happen in our nation’s capital.

Thank you, Care2 supporters!

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Photo Credit: New York NOW

 

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