Beyond Profits: Creating a New Kind of Corporation

It’s not unusual to hear companies talking about corporate philanthropy or donating a portion of their proceeds for the social good. Corporations such as The Body Shop, Google, Whole Foods and many others already do this. (Click on the links to see how). Yet, at the end of the day, even companies with the boldest social mission have to answer to shareholders who can revolt if they believe the company is not pursuing decisions that maximize profit.

That’s what happened to Ben and Jerry’s, a paragon of the socially-minded company, in 2000 when Unilever (the maker of soaps and soups and everything in between) proposed purchasing the company. Co-owner Ben Cohen refused, but the board could not resist the offer of $15 a share dangling in front of them and forced the owners to sell.

Now a group of local business owners, along with Trathen Heckman, the founder of , a Petaluma organization that works on sustainability issues, wants to fuse the divide between making profit and helping the world through something called benefit corporations.

“What is does is enables people to legally say ‘Yes, we want to make a profit and we want to do it in a way that internalizes costs like pollution, and takes care of people and their planet at the same time,’” Heckman says. “It enables corporations to do something larger than making money.”

For the idea, Heckman and three others were selected as the winners of Assemblymember Jared Huffman’s ‘Ought to be Law’ contest, in which constituents suggest new legislation, earlier this month.

They include Chris Mann, founder of Guayaki, a maker of yerba mate products in Sebastopol, Jeff Kletter, CEO and co-founder of Kinesys, a San Rafael company which produces a sports spray tan, and Stuart Rudick, a founding partner of Mindful Investors, a socially-responsible investment company in Mill Valley. 

In fact, Huffman has already authored a bill, AB 361, currently winding its way through the Assembly Judiciary Committee in Sacramento, modeled on successful legislation in Maryland, New Jersey, Vermont and Virginia.

The basic premise is to protect companies whose mission is to contribute to social change—whether through making ecologically-sensitive diapers or restoring the rainforest—from being bought out by other companies whose values may not be similarly aligned.

“The best interests of the corporation are commonly equated with the financial interests of the shareholders, so any decision by the directors must be tied back to serving the financial interests of the shareholders," said Mann, the CEO of Guayaki, and one of the award recipients. 

In other words, profit is the biggest motivator of a company and any decisions that may negatively impact its bottom line, are dismissed as not in the interests of the shareholders, Mann says.

If investors flock to benefit corporations, and Mann believes that they will, it will create a market-based solution to the world’s most challenging problems, he said. Guayaki, for example, is working to restore 200,000 acres of South American rainforest by 2020, which has been cut down to make room for farms.

The idea has been criticized by some as “greenwashing” and “adding another layer of government bureaucracy,” but Mann points out that becoming a benefit corporation is purely voluntary and would simply allow the companies with a social mission to pursue their work.

"We’re finding that there are a lot of shareholders interested in investing in companies that are doing the right thing. If there is no way to ensure this will happen, then you will just cut this movement off at the legs."