New Colorado law to give legal protection to corporate do-gooders

 

A bill establishing public benefit corporations called as B corps recently passed in the Colorado legislature and has been sent to Gov. John Hickenlooper for signature. According to Hickenlooper’s spokesman, the bill is under review.

Under the bill, Colorado companies may enjoy legal protection for doing good deeds other than just focusing on the profits of a company.

14 other states in which the District of Columbia is also included have enacted B-corp laws.

Businesses are obligated to maximize economic returns to shareholders, under normal corporate structures. That leaves officers working for the firm to face legal action if they choose to use company resources for non business causes.

A Greenwood Village business attorney who helped draft the Colorado law, Herrick Lidstone said, “A benefit corporation gives the (company) directors the ability to pursue public benefits without looking over their shoulders and wondering if they’re going to get sued by shareholders”.

According to the Colorado bill, benefit corporations are “intended to produce a public benefit and to operate in a responsible and sustainable manner” while also balancing shareholder interests.

B-corp status can be applied to private or publicly owned companies. Shareholder lawsuits that accuse companies of violating fiduciary duties are rare especially in private companies, but they can be filed by shareholders to decrease profits.

The bill states public benefits in which corporate support for artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological causes are included.

Supporters of Colorado measure include New Belgium Brewing, Namasté Solar and Boulder-based clothing and equipment firm GoLite. Chief executive of Namasté Solar, Blake Jones said, “We are big supporters of the concept. We want it to be possible for companies to exist for more than just maximizing return to shareholders. That’s what you want in your community — companies that are not solely looking at the bottom line”. Namasté already works like a B corp; the company donates 20% of its after-tax profits to charities.

Since states began passing bills in 2010, nearly two hundred companies have filed for B-corp status.

The most outspoken critic, State Sen. David Balmer, R-Centennial said, “I just don’t see where this is going to end up. Corporate law should be focused on maintaining shareholder value. We have an area of our statutes reserved for religious and charitable purposes, through nonprofit entities”. He also argued against a provision of the bill that allows shareholders to file suit if a B corp fails to live up to its public-benefit obligations.”Corporate law should remain focused on business governance issues. Derivative lawsuits should not be used this way,” he added.

According to a Philadelphia attorney who provided legal help to B-corp supporters, William Clark, the bill is supported by many Republicans and business-advocacy groups. Clark said, “It’s what Republicans and conservatives believe in. They see that it’s not a new government program, it’s not a tax. It’s very consistent with conservative ideals”.

Director of sustainability at New Belgium, Jenn Vervier said, “It is appealing to us in that it formally states our long-held belief that our true stakeholders include not just our shareholders but our co-workers, the community and the environment as well”.

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