Public Benefit Corporations: Businesses for the Social Good

(Meeting at Kickstarter. Photo: Michael Mandiberg)

Perry Chen and Yancey Strickler – co-founders of the popular crowdfunding website Kickstarter – made waves on Sunday when they announced that their company would become a “Public Benefit Corporation” (PBC), legally binding them to pursue positive social aims in addition to churning a profit.

Historically, the term has applied to groups receiving federal charters to pursue some goal in the public interest.  Nowadays, however, the term has expanded outside of nonprofit work into the realm of for-profit businesses.

Currently, only .01 percent of U.S. businesses are incorporated as PBCs. There are several big names among those that have, however, including Patagonia and Rasmussen Colleges. As a result of their novel corporate charters, these businesses are legally required to pursue social good as a part of their mission and guiding principles.

On Kickstarter’s blog, the company’s founders provide more detail on their decision to drop the “inc” from Kickstarter’s name and replace it with PBC:

Until recently, the idea of a for-profit company pursuing social good at the expense of shareholder value had no clear protection under U.S. corporate law, and certainly no mandate. Companies that believe there are more important goals than maximizing shareholder value have been at odds with the expectation that for-profit companies must exist ultimately for profit above all.

Benefit Corporations are different. Benefit Corporations are for-profit companies that are obligated to consider the impact of their decisions on society, not only shareholders. Radically, positive impact on society becomes part of a Benefit Corporation’s legally defined goals.

As part of Kickstarter’s new legal charter, it must subscribe to a number of pro-social policies. For example, it must donate a full 5 percent of its profits to arts organizations and groups that work to eliminate poverty.

The company will also pursue certification from B Lab, a nonprofit that certifies businesses as “Benefit Corporations.” A number of PBCs – including Patagonia – have been certified by the group.

On its website, B Lab displays its “Declaration of Interdependence,” outlining the vision of Public Benefit Corporations:

We envision a global economy that uses business as a force for good.

This economy is comprised of a new type of corporation – the B Corporation –

Which is purpose-driven and creates benefit for all stakeholders, not just shareholders.

As B Corporations and leaders of this emerging economy, we believe:

That we must be the change we seek in the world.

That all business ought to be conducted as if people and place matter.

That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all.

To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.

Kickstarter’s surprise move contravenes the common tech start-up story, in which companies strive to become “unicorns” that sell to larger companies for massive profits. This relatively new model – which blends the purviews of nonprofits and private enterprise – is certainly an exciting take on the character and identity of the 21st century business. Whether or not Kickstarter’s reincorporation heralds a more general revolution in business practices, the company will certainly contribute to the operations and missions of the nonprofit recipients of its donations. 

Key Elements Group LLC will continue to cover this exciting trend and explore how it fits into the world of philanthropy and nonprofit development.

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