Resource Proposal 2: Government Source

I am looking into the distinction between benefit corporations and B corporations to analyze which is more effective at promoting corporate social responsibility. I am also looking at the lack of regulation and auditing surrounding benefit corporations, and how they could be more effective if they had a higher level of supervision.

With the research I have done so far, it seems as though benefit corporations have a huge opportunity to become a new way to do business that prioritizes corporate social responsibility. There would obviously be challenges in this business form as well, but I think they have great potential. I have learned about the distinction between benefit corporations (a legal status administered by the state) and B corporations (a certification given by a nonprofit organization, B Lab). Companies can be one and not the other, both, or neither.

Source: New Legislation, Massachusetts General Laws Chapter 156E

This government source added to my knowledge of how a business would go about incorporating as a benefit corporation. They can either incorporate in this form originally or may switch to it later by changing their articles of incorporation, as well as gaining approval from shareholders/the board of directors. There are several requirements companies must meet to incorporate as a benefit corporation, including setting a benefit director independent from the company to monitor progress towards benefit goals and stating the benefit goals that the company hopes to achieve. All benefit corporations are subject to changes in law regarding benefit corporations and must issue annual reports, including a benefit report that is available to the public stating the company’s progress towards benefit goals.

This research really just identifies the formal process of becoming a benefit corporation, but I think it would be useful to outline these points in my paper to add to the general understanding of benefit corporations. This is also a relatively new topic, so I could not find many other government sources to use.

I think this information is very reliable because it comes from the SEC’s website.


2 thoughts on “Resource Proposal 2: Government Source

  1. It is not THAT “sec.” Look at the URL. It is from state of Massachusetts. SEC is secretary of the commonwealth! Of course, think about it- these are state laws. So it makes sense. In fact, this raises an interesting question.

    The SEC you have in mind is a federal agency since securities markets are national. Would benefit corporations trade on the NYSE or NASDAQ if they wanted?

    It seems that being exposed to that kind of pressure could push them away from their benefit status. But, at the same time, they are economic firms, not non-profits…. that is the whole point of the law as I understand it.

  2. At some level, I am still puzzled. Think about Stout’s book. She pretty clearly laid out that there is no ACTUAL law requiring profit maximization. The MA law seems to say that a benefit corporation frees up directors to not always maximize profit or “shareholder value” which I guess means current share price.

    So, it frees them to make choices that they were not already prohibited from making.

    Anyway, more substantively, the whole benefits report part is puzzling to.

    There are no parameters or guidelines for what it should include. I mean, to be extreme, a company that makes a nasty chemical that has terrible pollution impacts (but is legal) could be a benefit corporation and in its report talk about inviting kids to its plants to learn, or about seeking to avoid lay offs, or anything. In other words, there is no minimum amount of benefit.

    I don’t know what I would advocate they should have, but the vagueness of the whole law seems odd.

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