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The Benefit Corp Revolution: What it Means for Businesses, Non-Profits, and You
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The Benefit Corp Revolution: What it Means for Businesses, Non-Profits, and You

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    The Benefit Corp Revolution: What it Means for Businesses, Non-Profits, and You The Benefit Corp Revolution: What it Means for Businesses, Non-Profits, and You Presentation Transcript

    • Benefit Corp Revolution: What it means for businesses, non-profits, and YOUSPEAKERSJonathan Storper, Esq.Hanson Bridgett LLP MODERATED BY Leslie Keil, Esq.Dermot Hikisch Hanson Bridgett LLPB LabJosh Becker PRESENTED BYNew Cycle Capital
    • LESLIE KEIL, Esq. Senior Counsel Hanson Bridgett LLP GEO Circle Co-Chair Full Circle Fund
    • Tweeting Tonight? Mention @HansonBridgett @FullCircleFund @Bcorporation @JoshBecker2010#bcorp #SocEnt #csr
    • Socially Responsible BusinessesSeeking Legal Protection for Stated Values• Safe harbor for directors for multi-stakeholder approach• Flexibility to prioritize among profits, environment and social concernsBetter Exit Strategies and Succession Planning• Stated values unchanged by sale of minority/majority of stock• Greater flexibility to identify the "right" buyer and succession planning
    • Better Business Model• "Firms of Endearment" beat S&P 500 peer firms return 9x over a 10 year period• 60 million Americans are "conscious consumers"• "Socially responsible" investors manage $2.7 trillion• 100,000 sustainable businesses adopting a better model• Aligned strategic partners, vendors, suppliers and stockholders
    • JONATHANSTORPER, Esq.Partner & SustainableBusiness Practice Chair Hanson Bridgett LLP
    • What is a Benefit Corporation?• New class of for-profit general California corporation• Create traditional economic value, PLUS...  Purpose: creates a material positive impact on society and environment, taken as a whole  Accountability: In addition to profits, must consider environmental and social factors in actions and operations  Transparency: reports annually on environmental and social performance using independent standards• Flexible: can revert to general corporation or other entity• No independent certification requirements
    • What Makes a Benefit Corporation Different?PurposeTraditional Corporations•Engage in any lawful business activity•May identify narrower purpose in Articles of IncorporationBenefit Corporations•ADDITIONAL purpose to create "general public benefit"  Definition: A material positive impact on society and the environment taken as a whole, from the business and operations of a benefit corporation (§14601(c))  Adds to and/or limits other corporate purposes
    • What Makes a Benefit Corporation Different?PurposeOption to include 1+ "specific public benefit" purposes"Specific public benefits" (defined in §14601(e)):•Providing low-income or underserved individuals or communities: – beneficial products or services – economic opportunity beyond creating jobs in ordinary course of the business•Preserving the environment•Improving human health•Promoting the arts, sciences, or advancement of knowledge•Increasing flow of capital to entities with public benefit purpose•Accomplishing any other particular environmental/social benefit
    • What Makes a Benefit Corporation Different?AccountabilityMandatory: Board of Directors and Officers must consider impacton ALL of the following (§14620):•Shareholders • Customers•Employees/workforce • Environment (local and global)•Community and society, including any local community wherecompany, its subsidiaries or suppliers are located•Short and long-term interests, including: – benefits that may arise from its long-term plans; and – possibility that interests may be best served by retaining control•Ability to accomplish general, and any specific, public benefit purpose
    • What Makes a Benefit Corporation Different?TransparencyAnnual Benefit Report (§14630)•Explanation of how company pursued general/specific publicbenefit, the extent to which it was achieved, and circumstancesthat hindered achievement•Process and rationale for selecting the third party standardused to prepare report•Any connection between the company and creators of the thirdparty standard used that might affect credibility
    • What Makes a Benefit Corporation Different? Transparency How does the Assessment work? •Annually assess triple bottom line performance using an independent, third-party standard (§14600(g)) •Standard must be comprehensive, credible, independent and transparent •Must apply the standard consistently from one year to the next or explain reasons for inconsistencies •No auditing or certification required4024240.1
    • What Makes a Benefit Corporation Different? Transparency Third Party Standard Requirements • Independent third party standard • Uses a balanced multi-stakeholder approach • Developed by a company with no material financial relationship with the benefit corporation (= or > 5% ownership/income stream) • No more than 1/3 of the benefit corporation directors represent an association from a specific industry or a business which is assessed against the same standard • The benefit corporation is not materially financed by an association or business which is assessed by the same standard4024240.1
    • What Makes a Benefit Corporation Different? Transparency Sample of Qualifying Standards* • B Impact Assessment (www.bcorporation.net) • Global Reporting Initiative (www.globalreporting.org) • Green Seal (www.greenseal.org) • People4Earth Business Framework (www.people4earth.org) • Food Alliance (www.foodalliance.org) • ISO 2600 (www.iso.org/iso/social_responsibility) • UL Environment – ULE 880 (www.ulenvironment.com) * New standards are being developed and existing standards being tailored to meeting Benefit Corporation criteria4024240.1
    • What Makes a Benefit Corporation Different? Transparency Disclosure of Annual Benefit Report • Send to all shareholders within 120 days after fiscal year end • Post on benefit corporations website • Website version may exclude any financial or proprietary info • If no website, then provide free copy to anyone upon request4024240.1
    • Resources Benefit Corporation Information Center hosted by B Lab: www.benefitcorp.net Firms of Endearment: How World-Class Companies Profit from Passion and Purpose by Rajendra S. Sisodia, David B. Wolfe, and Jagdish N. Sheth. Upper Saddle River, PA: Wharton School, 2007 Profit for Life: How Capitalism Excels by Joseph H. Bragdon. Cambridge, MA: Society for Organizational Learning, 2006 The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance by Robert G. Eccles, Ioannis Ioannou and George Serafeim. Boston, MA: Harvard Business School, 2011
    • DERMOT HIKISCHDirector of Business Development B Lab
    • Big ProblemOur current capitalist system wasn’t designed for this • Current corporate law works against sustainability and social impact • No standards to distinguish ‘good companies’ from good marketing
    • Big OpportunityThe evolution of capitalism 20th Century 21st Century Shareholder corporation Stakeholder corporation Maximize Create shareholder value social and shareholder value exclusively simultaneously
    • The Entrepreneur is The Engine of ChangeB Lab is a nonprofit organization that supports the world’s leadingentrepreneurs using business to solve social problems Initiative 1: Shine a light on the Entrepreneur Initiative 2: Initiative 3: Remove legal Drive capital to the impediments for the Entrepreneur Entrepreneur
    • Big NeedStandards to drive support Last 10 years Next 10 years Good products Good companies + 500 others B Corporations * Impact Investing * Public Policy
    • What is a B Corporation? • Meet independent, comprehensive and transparent standards of social and environmental performance • Meet higher standards of transparency • Meet higher legal standards of accountability B Corporations * Impact Investing * Public Policy
    • B Corporation – Performance StandardsB Impact Rating System Free web-based tool for positive impact assessment (over 7000 users) • Comprehensive • Comparable • Transparent • Dynamic • Independent • Score 80 out of 200 points for certification B Corporations * Impact Investing * Public Policy
    • Certified B Corps – Accountability Standards Certified B Corps amend their bylaws giving shareholders additional rights requiring directors to: “consider the impact of decisions not only on shareholders, but on all stakeholders” B Corporations * Impact Investing * Public Policy
    • Initiative 1: Supporting a Movement Leader of this movement are 500+ B Corps across 60 industries and 40 states B Corporations * Impact Investing * Public Policy
    • Why Become a B Corporation?1.Lend their Leadership to advance B Lab’s mission to help create a new corporate form.2.Save money by taking advantage of the growing number of partnerships which deliver immediate financialvalue. (>$2m in annual savings1.Maintain mission by adopting the B Corp Legal Framework. As a B Corporation, founders and othermission-driven minority shareholders can hold directors accountable to consider the impact of operating andliquidity decisions not only on shareholders, but on all stakeholders.2.Enhance brand equity by differentiating the company, not justits products, through third party validation that companyhas met higher performance and legal standards.5. Enhance Brand Awareness, 300+ press hits in 2011,national brand campaign. B Corporations * Impact Investing * Public Policy
    • B Corporation – Benchmarking Over 2000 companies have completed the assessment B Corporations * Impact Investing * Public Policy
    • The Entrepreneur is The Engine of Change Initiative 1: Shine a light on the Entrepreneur Initiative 2: Initiative 3: Remove legal Drive capital to the impediments for the Entrepreneur Entrepreneur B Corporations * Impact Investing * Public Policy
    • Initiative 2: Advancing Supportive Public PoliciesThe community becomes a powerful constituency • New corporate form > Benefit Corporations • 7 states passed (MD, VT, HI, NJ, VA, CA, NY) • 10 states moving forward • Strong business support B Corporations * Impact Investing * Public Policy
    • The Entrepreneur is The Engine of Change Initiative 1: Shine a light on the Entrepreneur Initiative 2: Initiative 3: Remove legal Drive capital to the impediments for the Entrepreneur Entrepreneur B Corporations * Impact Investing * Public Policy
    • Initiative 3: Drive CapitalDriving capital beyond SRI to Impact Investing - Indpnt ratings agency based on B Ratings System (S&P analog) -Morningstar and Capital IQ for Impact - Fund Ratings and Company Ratings - Developed and Emerging Markets -50 GIIRS Pioneer Funds; 300 Companies; 30 Countries B Corporations * Impact Investing * Public Policy
    • 15 Pioneer InvestorsB Corporations * Impact Investing * Public Policy
    • 200 Pioneer CompaniesPioneer Companiesby Industry:Pioneer Companiesby Region: B Corporations * Impact Investing * Public Policy
    • Beta Analytics & BenchmarkingB Corporations * Impact Investing * Public Policy
    • Seizing the Opportunity Building a new sector of the economy• Creates economic opportunity• Strengthens communities• Restores environment• Alleviates poverty Legal Clean Tech Food Hospitality Private Equity Wealth Managemt Home Apparel Education Building Industry Retail Architecture Restaurant Arts Telecom Media PR Comm Consulting Developing Worldwww.bcorporation.net Banks Real Estate Footwear Marketing Renewable Energy ITwww.benefitcorp.net Biotechnology Personal Care Pharmaceuticals B2B B2Cwww.giirs.orgdermot@bcorporation.net B Corporations * Impact Investing * Public Policy
    • JOSH BECKER Partner New Cycle CapitalCo-Founder & Board Chair Full Circle Fund
    • Questions?Thank you for attending!