New type of corporation would allow & encourage social contribution, authors say
(ST. PAUL) – Senators Chris Gerlach (R – Apple Valley) and John Marty (DFL – Roseville), with Representative Linda Runbeck (R – Circle Pines), today announced the introduction of a bill that would create a new type of corporation in Minnesota to fill the gap between for-profit corporations and charitable non-profits. Called a Public Benefit Corporation or B-Corp, this flexible legal entity could both meet the needs of entrepreneurs and investors while creating a social benefit within communities.
Under current law, businesses established as traditional C-corporations have a fiduciary responsibility to their shareholders to maximize profits. This limits their ability to perform a “social good” as part of the operation of their company if it would cause a diminished financial return. Non-profits, on the other hand, lack working capital making long-term stability and growth challenging.
A new type of Public Benefit Corporation would allow companies to organize under a new corporate structure and be able to forfeit some shareholder profits in return for contributing to a social good.
“At a time when public budgets are squeezed and society’s needs are growing, we must begin finding additional ways to achieve our shared goals in society,” said Gerlach. “The new Public Benefit Corporation option will attract private capital from investors wishing to meet social needs or take advantage of opportunities to use their money in a way that benefits both themselves and their community.”
“This legislation will enable business owners to use their businesses for the benefit of all stakeholders – their customers, their community, their employees as well as their shareholders,” added Marty.
Runbeck continued: “Shareholders would understand that a smaller dividend check for them means making a positive difference in the community.”
"When the economy is in crisis it is imperative that public policy leaders respond with new ways to attract capital into the marketplace," said Steve Young, executive director of the Caux Roundtable. "Public benefit corporations are one way forward to a better future for us all."
There are currently seven states that have enacted laws allowing benefit corporations or B corps, although similar entities exist on a smaller scale and in other countries.
The bill will be heard in the Senate Commerce & Consumer Protection Committee on Wednesday.