What's the Benefit of a Public Benefit Corporation? Veeva Systems, Inc. is the first public company to convert since Delaware legislation was signed into law in 2013.

• Author: Hall, April
• Position: BEYOND THE BOTTOM LINE

A medical technology company that serves the pharmaceutical industry through data organization and hosting is the country's first corporation to convert to a public benefit corporation (PBC).

Veeva Systems Inc., founded in 2007 and based in California, is a publicly traded cloud software company that serves more than 600 life science companies. In early February, after earning nearly all the voting shareholders' support, the NYSE-listed company converted to a PBC, a designation that makes consideration of all stakeholders a binding fiduciary duty.

Many companies pledge to support stakeholders, and some have a benefit corporation designation from the nonprofit B Lab, but B Lab's designation does not have an effect on the corporate charter.

Veeva did not seek a B Corp designation before making the conversion, but its process is something Holly Ensign-Barstow, B Lab's CEO, has watched closely. She says there are several other companies now waiting in the wings to follow in Veeva's footsteps.

Josh Faddis,Veeva's senior vice president and general counsel, says the company's board of directors discussed the conversion for quite some time before taking the proposal to its largest investors. While Delaware legislation creating public benefit corporations was signed into law in 2013, no company had applied to make such a convesion, and few companies have freshly incorporated as a PBC. Veeva, which is incorporate in Delaware is breaking new ground.

"We thought that making the legal commitment was more meaningful for the company and more meaningful to our customers --and also more lasting," Faddis says. "We also knew that we were going to do it in a way that was consistent with our business and what our impact could be."

Now that Veeva is a PBC, its board must consider the impact of its decisions on all stakeholders. Veeva is still a for-profit public company, but shareholders' interests will not be paramount. While this potentially could turn some investors off, 99% of Veeva's voting shareholders were in favor of the conversion.

Institutional investors, including Black Rock, State Street and ISS, were among the supporters of the move.

Patrick McGurn, special counsel and the head of strategic research and analysis for ISS, notes that while Veeva's CEO and founder, Peter Gassner, controls the company through a dual-class stock structure that is due to sunset in 2023, "there was clearly no significant groundswell of opposition within the shareholder...