C-Corporations, 501-(c)3 Non-profits, meet "B-Corporations"

Read this AM about Vermont Bill S.263. 

One important thing I learned in my 30s and 40s was that if you have a "one in a million" idea, and there are 6 billion people, that statistically there are 6 million other people with the same idea or inspiration. If you apply "One percent inspiration, 99% perspiration", then of those million people, ten thousand of them have the energy and guts to pursue their good ideas.  In the past, there was a huge advantage to being born in a country which had other inspired and perspired people.  Kind of like going to college may not make you smarter than going to the library, but you are more likely to meet other people you need to test and vet your ideas.

That's a bit of a long preamble to the press release below, which I could see as uniquely targeted at Good Point Recycling and American Retroworks if I was 18 years old.  The folks at Certified B-Corporation, among others, realize that the old "non-profit" and "for-profit" labels of the 1970s and 80s were not very good predictors of who actually had an impact on GOOD.  I ran Retroworks as a non-profit, and ran it as a for-profit, and I made more money and did less GOOD as a non-profit.  As a for-profit, I pay taxes and employ more people and can use growth as momentum to leverage loans rather than "donations".  For our presentation at Investors Circle last year, we pre-qualified as a B-Corporation but balked at paying for the cost of actual certification (a bit like an operation which is "R2 Compliant" without paying for R2 auditors).

We switched from a non-profit with another non-profit "fiscal agent" in 2001, and the power and energy unleashed us to make Retroworks de Mexico, WR3A, and to bring ISO14001 and R2 standards to trading partners overseas.  My company was a "Benefit Corporation" before this law was passed or this term was coined or there was a choice between for-profit and non-profit incorporation.

The challenge now is to maintain the healthy skepticism of green-washing (you can form yourself as a B and then emerge from a mistake to find you are in debt and unable to do well by doing good).   I distrust any "snapshot" approach to vetting people or corporations.  Businesses change.  People change.   Recordkeeping and transparency are the key.  I assume the Benefit Corporation laws will have rules about those records, like 501-c3 laws do for non-profits filling out Form 990.  But the Form 990 is a pretty limp ruler, which measures Salvation Army and Planet Aid without the ability to distinguish much between the two.

So I live and love the idea of the Benefit Corporation.  But as soon as there is an outside reward for being one, greedy people and incompetent people will follow us.  College Admissions standards work well enough (if imperfectly) as a predictor of 4-years of academic performance.  But they have the benefit of selectivity (the more people apply, the easier for the college to score well on that standard) and also the benefit of only predicting 4 years of behavior.  I guess ideally, there would be a strong competition for B-Corp status, kind of like the EB-5 Visa program (admission to USA investment visas, there is a certain number available, so it creates competition among foreign investors).  But I think there would be a massive screeching if the IRS tried to limit the number of non-profit corporations, or heaven forbid, take some old 501c3 status away based on actual performance (they can get taken away for fraud from time to time, but even that is rare).
I am simultaneously delighted with the Benefit Corporation and skeptical that a government tax status will do anything more for the B-Corps than 990s do to keep out lazy and inept tax dodgers from the ranks of spiritually motivated, honorable non-profiteers.

Article below.  Back to the battle of hard work.

Maryland First State in the Union to create Benefit Corporation Legislation

April 13, 2010 - Annapolis, MD:  Maryland Governor Martin O'Malley signed into law the nation's first legislation creating Benefit Corporations, a new class of corporations required to create benefit for society as well as shareholders.  
Unlike traditional corporations, Benefit Corporations must by law create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards. 
The legislation, sponsored by Senators Jamie Raskin and Brian Frosh and Delegate Brian Feldman, passed the Maryland Senate with a vote of 44 - 0 and the Assembly 135 - 5.
"Milton Friedman would have loved this," said Andrew Kassoy, co-founder of B Lab, the non-profit that drafted the model legislation with William H. Clark, Jr., partner in the Corporate & Securities Practice Group of Drinker Biddle and Reath.   "For the first time, we have a market-based solution supporting investors and entrepreneurs who want to make money and make a difference," Kassoy added.
The new law addresses a long time concern among entrepreneurs who need to raise growth capital but fear losing control of the social or environmental mission of their business. These entrepreneurs and other shareholders of Benefit Corporations now have additional rights to hold directors accountable for failure to create a material positive impact on society or to consider the impact of decisions on employees, community, and the environment. 
From a company's point of view, the new law empowers directors of Benefit Corporations to consider employees, community and the environment in addition to shareholder value when they make operating and liquidity decisions. And, it offers them legal protection for those considerations.
"Today marks an inflection point in the evolution of capitalism," said B Lab co-founder Jay Coen Gilbert.  "With public trust in business at an all-time low, this represents the first systemic response to the underlying problems that created the financial crisis -- protecting companies from the pressures of short-termism while creating benefit for shareholders and society over the long-haul."
"This is a great moment in the evolution of commercial life in Maryland and America," said Senator Raskin.  "We are giving companies a way to do good and do well at the same time.  The benefit corporations will tie public and private purposes together."
Maryland is the first state to pass Benefit Corporation legislation, but others are quickly following Maryland's lead.  Vermont Bill S.263, co-sponsored by Senators Hinda Miller and Peter Shumlin, has already passed the Senate and will be considered by the Vermont Assembly over the next 30 days.  Other states considering the legislation include Colorado, New York, North Carolina, Oregon, Pennsylvania, and Washington.

Even at 16 and 17 years old, when I was attracted to the idea of spiritual perfection, the second chapter of the Gita spoke to me and said karma yoga - doing - was a better fit for me than