What A Good Company Looks Like

Twitter co-founder Evan Williams today declared at SXSW that the company's first principle is to

Twitter co-founder Evan Williams today declared at SXSW that the company’s first principle is to “be a force for good.” Like Google’s longstanding “don’t be evil” slogan, it’s a fine idea. It also could seem to conflict with each companies’ legal obligation to maximize returns for investors.

What would it look like if a company actually had that sentiment baked into its corporate charter? It might instruct directors to

consider the effects of any action … on the shareholders, employees, suppliers, and customers … the economy of the state, region and nation, community, and societal considerations, … and the local and global environment.

That’s from a bill before the Vermont Senate that would create a new legal form for companies in the state to that want to become designated “for-benefit corporations.” It’s designed to let companies that have social missions to codify those values in their governing documents. The proposed law also instructs directors to “consider the long-term and short-term interests of the corporation, including the possibility that those interests may be best served by the continued independence of the for-benefit corporation.” That would help firms avoid what happened to Ben & Jerry’s: reluctantly selling out to a buyer that doesn’t share the original firm’s values.

The Berwyn, Pa.-based nonprofit B-Lab, which certifies member businesses on social and environmental performance, is pushing for laws in several states to make it easier to formalize values in business. Vermont may be the first to pass legislation. Maryland legislators are considering a similar proposal, and efforts are underway in New York, Pennsylvania, North Carolina, Colorado, and Oregon. California lawmakers are weighing a different bill that would give companies the flexibility to incorporate with a particular non-financial purpose, but not the requirement to consider all the stakeholders that Vermont’s bill names.

“What the corporation will be doing will be committing to create general public benefit and may also elect to pick specific public benefit,” says Bill Clark, a partner at law firm Drinker Biddle who is helping B-Lab develop legislation on a pro-bono basis.

The movement to do create this in Vermont didn’t begin in earnest until last year, according to Andrea Cohen, public policy manager at Vermont Businesses for Social Responsibility. I mentioned a few months ago that one of the big ideas we’d see this year is new forms for social enterprise and new ways to finance them. Vermont could be the first state to make that law in the next several weeks before the state’s legislative session ends. Then companies that want to “be a force for good,” as Twitter’s founder says, could write it into their charter.

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