Submitted by John Leemhuis, Leemhuis Legal, PLLC
The issue of corporate purpose has become a hot topic recently as highlighted by the pledge of the Business Roundtable a few weeks ago. That group consists of just shy of 200 of the CEOs of major corporations such as Amazon, Bank of American and Apple, to name a few. So when that group comes out with a statement that a corporation’s purpose is not to primarily enhance shareholder value, but to work for the benefit of corporate stakeholders including (along with shareholders) customers, employees, suppliers, the community where the business is located, and the environment, people take notice. In my webinar recorded a couple weeks ago, I pulled a number of headlines from major periodicals into my presentation to show the wide spectrum of response ranging from mild skepticism to enthusiasm, and from disapproval to a challenge of “show me” by Ben and Jerrys.
As if on cue, Whole Foods recently announced that they were cutting benefits to some of its part-time workers, and the L.A Times declared that Jeff Bezos had become the first signatory from the Business Roundtable to go back on his pledge.
One of the fundamental questions being asked about this new statement is “how do we know if these companies are being sincere?” Phrased another way, “is what they are saying just good marketing?”
A number of businesses have truly taken the concept of stakeholder value to heart by either becoming a benefit company or by becoming a Certified B Corp. It’s truly a new way of doing business. These new methods of operating a for-profit business are designed to make operating for a larger constituent group a fundamental part of the business. These businesses are working for the benefit of people, planet, and profit. In the case of B Corp certification, the company goes through a thorough review to obtain its certification, and in the case of benefit companies, the company is governed by state statute that requires the business to consider the broader stakeholder group when making business decisions. Companies like Patagonia are Certified B Corps that have decided to “walk the walk” and not just “talk the talk.” So if Jeff Bezos and his peers on the Business Roundtable are sincere about changing the purpose of business, becoming a Certified B Corp or opting into benefit company legislation would be a decisive move to back up their words.
*To hear more from John Leemhuis about B Corps and Benefit Companies, check out the webinar on Thursday, October 3. You must register to receive the link to access the webinar and you may do so here.*