The B Economy: How benefit corporations benefit society, not just the bottom line: Realigning business models to create a business climate where all stakeholders matter.

Author:Alexander, Frederick
Position:BEYOND the Bottom Line

In August, Sen, Elizabeth Warren dropped a bombshell piece of legislation that would require every company with more than $1 billion in revenues or 5,000 employees to become a "benefit corporation." Some called the legislation brilliant; others labeled it Marxist.

It is remarkable how closely the benefit corporation idea in her bill tracks legislation supported by Republicans around the country. Thirty of the 34 legislatures that adopted a benefit corporation option did so unanimously. The laws were signed by 16 Republican governors including Mike Pence, Nikki Haley, Sam Brownback, Scott Walker and Jan Brewer. Libertarian senator Rand Paul endorsed the benefit corporation in 2014.

Why has corporate law reform become a bipartisan issue? The answer lies in the importance of the corporate firm to a successful capitalist society. As that society evolves, corporate laws must adapt.

Our material success depends on capitalism, a self-organizing, bottom-up system, not a controlled top-down one (those tend to fail). But this success has created an increasingly interdependent globe, and critical social and environmental systems are at risk as the world's carrying capacity for social instability, environmental pollutants and economic risk are approached.

Complicated, self-organizing systems (like modern capitalism) rely on feedback, but we have de-emphasized all non-financial feedback in corporate law by operating under shareholder primacy: the assumption that corporations operate primarily for the benefit of shareholders.

In order to save capitalism, we need to upgrade its feedback mechanisms. Warren's bill and the state legislation authorizing benefit corporations, do just that. (Warren would impose a mandatory, federal system on all corporations, while the state statutes allow a market decision as to adoption, which is a critical distinction.)

As another example of a new feedback mechanism, Delaware's Certification of Adoption of Sustainability and Transparency Standards Act (CASTS) will go into effect in the fall. It's a first-of-its-kind legislation that provides a rubric and public platform for any Delaware entity to measure and report its sustainability.

A host of organizations address the need for business to widen its aperture: B Lab, the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), International Integrated Reporting Council (IRRC), CERES, JUST Capital, Conscious Capitalism. Many of these...

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