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Bipartisan plan would encourage ‘social good’ by companies

By Cyndy Brucato | 02/21/12
Sen. Chris Gerlach
senate.mn
Sen. Chris Gerlach

It was the bipartisan calm before the partisan storm of redistricting.

Republican state Sen. Chris Gerlach and his colleague on the left side of the aisle, state Sen. John Marty, announced their collaboration on a bill to create a new kind of corporate structure in Minnesota. 

It would be called a public benefit corporation or B-Corp and would allow companies to consider motives other than shareholder value when running their businesses.  The goal, said Gerlach, Marty and Republican House author Linda Runbeck, is to establish a corporate structure that encourages the social good, like non-profits, while creating the for-profit base that promotes business growth.

“At a time when public budgets are squeezed and society’s needs are growing, we must begin to find add ways to achieve our shared goals,” said Gerlach. A B-Corp would attract private investors and foundations, for example, that are willing to accept a lower rate of return in exchange for public good. The legislation would allow a business to do this without the risk of shareholder lawsuits.  

Runbeck cited Minneapolis-based Finnegans Beer as a company that would benefit under the B-Corp structure. Finnegans donates 100 percent of its profits to community causes. “This will help a company like Finnegans grow,” she said. 

Sen. John Marty
senate.mnSen. John Marty

The definition of “social good” is up to the company. Objectives can be as diverse as higher wages, green manufacturing or support of the arts. “The list of things that can be done in a free market environment is endless,” said Steve Young, executive director of the Caux Roundtable, an international organization of business leaders that promotes what it calls “moral capitalism.”

Young has worked for several years with Marty, who started drafting the legislation when his DFL Party was still in the majority.  Now, with the opposition in control, the legislation appears to have clear path to the governor’s office.  “This is the kind of legislation that should have support across the political spectrum,” Marty said.

The legislators invoked bipartisanship often during the news conference as they extolled the proposal and predicted passage. Business executive Young praised the group. “We are not divided on partisan views,” he said. “Why not something in the middle?”

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Cyndy Brucato

Cyndy Brucato has a three-decade career as a journalist and political strategist.

Comments (8)

An interesting idea

Submitted by James Hamilton on February 21, 2012 - 3:55pm.

though I still think there's room for some general modifications to the laws governing C corps so as to permit directors and officers to take additonal factors into consideration without risking suit by shareholders, corporate raiders and lawyers specializing in shareholder litigation.

A link to the bill would be appreciated, as it would be in any article discussing legislation.

Already a business structure like this

Submitted by Kandace Olsen on February 21, 2012 - 4:12pm.

Cooperatives are owned by their customers, are not-for-profit, and return capital credits (profits) to their member owners. And lest you think co-ops are tiny, rural, know-nothing businesses, you should know that one of the largest cooperatives in the country--CHS--is located in the Twin Cities, with annual revenues of more than a billion dollars (probably a few billion). So is Land O' Lakes, Great River Energy and a host of other well-known Minnesota names (open disclosure: I work for Great River Energy). So why invent a new business structure when you already have the cooperative business structure?

B-Corp designation would attract investors

Submitted by Danie Watson on February 21, 2012 - 4:12pm.

It would be beneficial to Minnesota corporations interested in this structure to be able to tell potential investors that they are organized under a special designation. We learned after Enron that investors, especially institutional investors such as state pension funds, we eager for investment opportunities that offered a socially responsible structure. The guy who managed North Carolina's pension fund was quoted at the time as saying he would seek out such opportunities if they were available.

The sticking point in this discussion has been "carrot or stick?": Do we offer incentives such as tax breaks or bragging rights for companies that organize this way, or do we use this as a way to punish the companies that abuse the environment or workers? I know John Marty has advocated this as a way to encourage the good companies to do good and protect them from being sued for their actions as good stewards of anything beyond the almighty dollar.

Oh please

Submitted by Dennis Tester on February 21, 2012 - 4:31pm.

"Objectives can be as diverse as higher wages, green manufacturing or support of the arts."

This idea just goes to show how out of touch these people are with the real world.

The last three evil corporations I worked for all were heavily involved with the United Way, Toys for Tots, Second Harvest, Caring and Sharing Hands, etc. The "free market" spin was they even made it a fun competition to see which department could load the most food pallets or donate the most toys or work the most hours at the food shelf.

Maybe Marty et al were unaware of these activities because these private companies never sought any publicity for their deeds, they just did it with good cheer and in the spirit of helping their fellow citizens in need. They didn't need the coercion of government to do the right thing.

What coercion?

Submitted by David Galitz on February 21, 2012 - 9:51pm.

There's no coercion being proposed here. No one is pointing a gun, or threat of government action at anyone to incorporate in this manner.

If you want to solely concentrate on profit, and tossing a few crumbs here and there, continue at it. But this would give others the opportunity to do more.

That you have a problem with that is quite telling.

" ... or do we use this as a way to punish

Submitted by Dennis Tester on February 22, 2012 - 8:50am.

"The sticking point in this discussion has been "carrot or stick?": Do we offer incentives such as tax breaks or bragging rights for companies that organize this way, or do we use this as a way to punish the companies that abuse the environment or workers?"

Your point is?

Submitted by Rachel Kahler on February 22, 2012 - 10:58am.

You're quoting someone else, not the article or the person your addressing, to allegedly support your claim. This bill appears to be a carrot, not a stick. A carrot, by definition, cannot be coercion. Just because you are not clear on the boundaries of a definition, does not make your opinion correct. At least here, the facts lie outside your opinion.

A Great idea that works!

Submitted by Deborah McLaren on February 21, 2012 - 7:18pm.

There are other states that already utilize the B Corp status. Personally, I've been waiting a long time for this. I have a for-profit business that is basically a social enterprise. There would be great benefits since the B Corps are basically set up to benefit society, the environment, etc. Thanks to the collaborative work of Runbeck and Marty, two leaders who choose to work for the public rather than draw an uncompromising line between their parties (as so many have done and the public rarely benefits).