Benefit corporation

In the United States, a benefit corporation is a type of for-profit corporate entity, authorized by 35 U.S. states and the District of Columbia that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals, in that the definition of 'best interest of the corporation' is specified to include those impacts. Traditional C Corporation law does not specify the definition of 'best interest of the corporation' which has led to profit motivations being used as the main driver for best interests. Benefit corporations may not differ much from traditional C corporations. A C corporation may change to a B corporation merely by stating in its approved corporate bylaws that it is a benefit corporation. In the United States, a benefit corporation is a type of for-profit corporate entity, authorized by 35 U.S. states and the District of Columbia that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals, in that the definition of 'best interest of the corporation' is specified to include those impacts. Traditional C Corporation law does not specify the definition of 'best interest of the corporation' which has led to profit motivations being used as the main driver for best interests. Benefit corporations may not differ much from traditional C corporations. A C corporation may change to a B corporation merely by stating in its approved corporate bylaws that it is a benefit corporation. A business may choose to file as a benefit corporation instead of a traditional C corporation for many reasons. A study done by MBA students at University of Maryland showed that the main reason businesses chose to file as B corporations was for recognition of their values and marketing benefits of those values. A benefit corporation's directors and officers operate the business with the same authority and behavior as in a traditional corporation, but are required to consider the impact of their decisions not only on shareholders but also on employees, customers, the community, and local and global environment. For an example of what additional impacts directors and officers are required to consider, view the 2015 Maryland Code § 5-6C-07 - Duties of director. The nature of the business conducted by the corporation does not affect their status as a benefit corporation, instead provides them protection for including public benefits in their missions and activities. Shareholders typically judge a company's well-being on its long term financial success, in addition to public perception and quality of product, but in recent decades quarterly trading reporting has led to hyper-focus on short-term gains. As such, the perception that corporate directors are legally bound to maximize shareholder value has grown, although it is not true. The benefit corporation legislation ensures that a director is required to consider other public benefits in addition to profit, preventing shareholders from using a drop in stock value as evidence for dismissal or a lawsuit against the corporation. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard. However, few of the states have included provisions for removal of benefit corporation status if they fail to do so, or if those reports show below-expected ratings. There are around 12 third-party standards that satisfy the reporting requirements of most benefit corporation statutes. A benefit corporation need not be certified or audited by the third-party standard. Instead, it may use third-party standards solely as a rubric to measure its own performance. In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation. As of March 2018, 35 states and Washington, D.C. have passed legislation allowing for the creation of benefit corporations: Connecticut's benefit corporation law is the first to allow 'preservation clauses,' which allow the corporation's founders to prevent it from reverting to a 'For Profit' entity at the will of their shareholders. Illinois established a new type of entity called the “benefit LLC,” making the state the first to allow limited liability companies the same opportunities afforded to Illinois corporations under the state's Benefit Corporation Law. In December 2015, the Italian Parliament passed legislation recognizing a new kind of organization, named Società Benefit, which was directly modeled after Benefit Corporations in the United States. This made Italy the first country in the world to make this legal status available across its entire territory.