A recent Kansas bill now makes it easier for for-profit corporations to pursue beneficial activities, such as becoming more socially and environmentally responsible.
Governor Sam Brownback signed a bill in May, effective July 1, to create a new classification of corporations in Kansas known as “public benefit corporations”.
Many popular for-profit corporations believe that their mission lies beyond maximizing profits for their stockholders. Traditionally, the directors of a for-profit corporation have the duty to operate the company in a manner that maximizes value for the stockholders. Failure to do so allows the stockholders to sue.
This new law will allow public benefit corporations to engage in socially or charitably beneficial endeavors even if those pursuits don’t directly improve the bottom line. Some well-known benefit corporations include Method, Kickstarter, and Patagonia.
Public benefit corporations must emphasize a desire to help the public within their mission statement. They will now be tasked with ensuring that they are contributing to a greater public good; emphasizing any positive effects and reducing any negative effects. The law also states that public benefits include those of an “artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.”
According to Benefitcorp.net, “Benefit corporations expand the obligations of boards, requiring them to consider environmental and social factors, as well as the financial interests of shareholders.” This allows corporations the freedom to impact society and the environment while keeping stockholders in mind.
If you are interested in starting a new socially, environmentally or culturally-conscious business, or updating an existing business, contact our office for more information.
References: Benefit Corporation FAQ http://benefitcorp.net/faq
Public benefit corporations bill becomes Kansas Law http://www2.ljworld.com/news/2017/may/15/public-benefit-corporations-bill-becomes-law/