Is there a case for holding corporations accountable for more than maximizing profits? William Clark LAW ’83 thinks so, and has done his best to make it in the Model Benefit Corporation Act, enacted into law in 28 states and the impetus for federal legislation proposed by Senator Elizabeth Warren. Clark, a principal drafter of the Model Act, returned to his alma mater to discuss the business model alongside Delaware state Representative Melanie George Smith and Professor Harwell Wells.
Benefit Corporations, commonly known as B-Corps, are accountable to what Clark calls the “triple bottom line: profit, people, and planet.” They recognize a corporate duty to contribute, along with government and philanthropy, to the greater social good. Clark offered as examples a corporation that took into account the fact that 400,000 Philadelphians live below the poverty line – almost half of those in deep poverty, meaning that their income is less than half the poverty line. A Benefit Corporation might incorporate addressing this entrenched poverty into their business plan. Alternatively, a Benefit Corporation might seek to impact the depletion of groundwater supplies in US caused by the Great Pacific garbage patch.
Under the Model Act, the corporation’s purpose is redefined to have a material positive impact on society as a whole as a business operation. This impact must come from how the business itself is run, not just distribution of profits. Directors have a legal obligation to consider the interests of stakeholders (e.g., employees, the surrounding environment, or inner city residents) and the corporation must report each year on how it has performed in its broader purpose. Clark emphasized that these “bottom line” goals have nothing to do with political or partisan ideology – in fact, one of the factors that has made the model legislation so successful is that it resonates with both liberals who advocate for social welfare and conservatives who advocate for empowered markets.
It has also resonated with Senator Elizabeth Warren, who has recently introduced the Accountable Capitalism Act, which would require companies with $1 billion or more in annual revenue to commit to the triple bottom line in addition to other related standards and requirements. Clark expressed concern that the Act, while well-intentioned, would federalize an issue better addressed by state law.
To date, Clark’s Model Benefit Corporation Act has become law in 28 states, Italy, and Colombia. Seven additional states and Puerto Rico have adopted variations of the Act to meet their unique needs, and ten additional countries are considering similar legislation, giving Clark’s work global, and lasting, impact.