Written by attorney John Bishop Montgomery

Introduction to the Benefit Corporation

If you’d like to become expert in the newest evolutionary corporate form—the benefit corporation—then this guide is for you. This guide is adapted from one of five articles about the benefit corporation in the July 2016 edition of the American Bar Association's Business Law Today

Additional resources provided by the author

It often takes several months to become familiar with the benefit corporation, understand the new fiduciary responsibilities, and feel safe and inspired enough to consider using the form. Simple fear is often the biggest obstacle to corporations adopting this new form—fear of the relatively new, fear of being less profitable, and fear of learning how to consider the interests of all stakeholders. This fear is a normal part of the process and and it can take a while to feel comfortable. Once you understand how simple the benefit corporation really is and that all of your knowledge about corporate law still applies, you can relax and feel comfortable about the new form. Here are some key documents, which you can find on-line, that answer some of the common questions about the benefit corporation, establish its legitimacy as a valid approach to doing business, and suggest that doing business in this form may actually provide a better rate of return to your investors than a conventional corporation. B Lab answers many frequently asked questions about benefit corporations on its website as do the articles in the July 2016 edition of the American Bar Association's Business Law Today. The white paper, The Need and Rationale for the Benefit Corporation, which includes an annotated copy of the model benefit corporation legislation, and a copy of the applicable state’s benefit corporation statute establish how simple the benefit corporation really is. Two recent law review articles penned by Delaware Supreme Court Chief Justice Strine, Making it Easier for Directors to Do the Right Thing and The Dangers of Denial cited above establish the legitimacy of the benefit corporation and show why socially and environmentally responsible businesses need the form to transcend the constraints of the profit maximization paradigm. The white paper by Professor Robert Eccles and colleagues of Harvard Business School, The Impact of Corporate Sustainability on Organizational Processes and Performance, and the Oxford University report, From Stockholder to Stakeholder: How Sustainability Can Drive Financial Outperformance demonstrate the financial superiority of businesses that adopt principals of sustainability such as those embedded in the benefit corporation. Kickstarter’s charter provides a good example of a Delaware public benefit corporation charter that contains several specific public benefits.

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