New Corporate Class Would Allow More Options

A bill in the Pennsylvania Senate would allow certain corporations to sacrifice some profit in order to do social good, an avenue currently barred by corporate law. These businesses would be in a class of their own.

Senator Daylin Leach wants corporations to have the freedom to benefit their community, the environment or any other cause they see fit without fearing lawsuits from investors. Under corporate law in Pennsylvania, investors can sue a company when its board of directors knowingly makes a decision to sacrifice profits to do good.

Leach says these “Benefit-” or “B-Corporations” would be required to have a Director of Benefits to report additional information about the company’s not-for-profit decisions.

The Montgomery County Democrat says B-Corporations wouldn’t get any financial incentives.

“Once we start providing specific financial benefits, then we have to get into the sort of messy business of deciding what is good and what is not good. Some people think reducing poverty is good. Some people think reducing abortions is good, or whatever it is. The state shouldn’t be involved in deciding what is good; we let the investors and the corporations decide.”

Leach says he’s hopeful the bill will be passed swiftly because of its bipartisan support. He says liberals like the bill because it encourages corporations to support social justice, while conservatives like it because it would make the free market even more open.

The option to become a B-Corporation would be open to any company, but the government could not require a group to do so. Likewise, investors would only invest in the B-Corporation if they supported its not-for-profit ventures.