New York Legalizes Benefit Corporations = Profits + Public Benefit

As of February 10, 2012, corporations in New York who designate themselves as a “Benefit Corporation” can legally pursue a “double-bottom line” of social justice and profits (click here for the announcement from State Senator Daniel Squadron).   Normally, a corporation’s directors and officers are held to have a fiduciary duty to the shareholders, meaning that pursuing interests outside of profit seeking can open directors and officers to shareholders lawsuits.  By allowing Benefit Corporations to exist, directors and officers have legal protection to engage in activities that promote a social good, such as using environmentally friendly materials, even though it may hurt their financial performance.

Although the Benefit Corporation structure is relatively untested in terms of legal issues, such as what happens if the B-corporation or one of its officers doesn’t meet its social obligations or fails to adequately deal with compliance and disclosure, this legislation officially pens the door for a new way of doing businesses, and that can only be a good thing.

Click here to access the non-profit group “B-Lab” which promotes the legalization of Benefit Corporations across the United States.  NOTE: that a “Certified Benefit Corporation” via B-Lab is NOT the same thing as being a legally formed Benefit Corporation.  While being a Certified by B-Lab can assist a company in meeting certain standards, the certification process by itself will not provide directors and officers with the legal protections of a Benefit Corporation formed under the laws of New York.