Academic journal article Journal of Corporation Law

Finding the Benefit in a New Administration: A Uniform B Corporation Legislation

Academic journal article Journal of Corporation Law

Finding the Benefit in a New Administration: A Uniform B Corporation Legislation

Article excerpt

I. INTRODUCTION: B CORPORATION LEGISLATION GOING FORWARD II. BACKGROUND: DEVELOPMENT OF B CORPORATIONS    A. The Birth of B Lab    B. B Lab Develops Model Legislation      1. Creation and Purpose      2. Accountability      3. Transparency      4. Adoption of the Model Legislation    C. Alternative Legislation: Delaware Model      1. Creation and Purpose       2. Accountability       3. Transparency    D. Hybrid Legislation: Colorado Model      1. Creation and Purpose      2. Accountability      3. Transparency     E. The Legislation Being Adopted Today III. ANALYSIS: CURRENT SHAREHOLDER-CORPORATION RELATIONSHIPS IN NEED     OF     A Hybrid Legislation     A. The Corporation-Shareholder Relationship      1. Interests of Millennial Investors      2. Business Judgement      3. Shared Interest in Transparent Reporting IV. RECOMMENDATION: A UNIFORM B CORPORATION LAW    A. Creation and Purpose    B. Accountability    C. Transparency V. CONCLUSION: ADOPTING A UNIFORM B CORPORATION LAW 

I. INTRODUCTION: B CORPORATION LEGISLATION GOING FORWARD

The benefit corporation form is likely to become an increasingly important entity choice as the Trump administration continues to roll back regulations on companies. (1) As the Federal Government takes its hands off of businesses, intending to eliminate inhospitable restrictions, corporations will have greater freedom than they have had since the Reagan administration. (2) While "many business groups are thrilled" with this newfound flexibility, corporations with social-minded goals may be wary of how this freedom could jeopardize their ability to safeguard social interests, which were previously protected by federal regulations, if the companies simply continue to operate under the traditional corporate form. (3)

In light of the potential desirability of an entity form that allows companies to re-impose standards that serve social interests, this Note addresses the different options states have if they do not already have benefit corporation legislation and they choose to adopt their own laws: the Model statute, the Colorado statute, and the Delaware statute. This Note is intended to compare and contrast the current legislation governing B corporations. It begins with an exploration of the development of B corporations from their beginnings with B Lab's Model statute, to Delaware's version of the legislation, and finally Colorado's hybrid law. Part II will address the current shareholder and corporation relationship and address how this current interaction is reflected in the various legislation. This Note will then conclude that a uniform statute modeled after the hybrid laws should be available for states that have not yet adopted B corporation laws in order to create the best communication between shareholders and corporations and ultimately provide a medium for both liberal and conservative entrepreneurs to safeguard social goals without direct government regulation.

II. BACKGROUND: DEVELOPMENT OF B CORPORATIONS

Despite the dicta in Dodge v. Ford Motor Co., which misleadingly implies that for-profit corporations are meant to be aimed at "maximizing the financial returns to shareholders," businesses may actually be created for any legal purpose. (4) Within this legal framework, businesses are free to take on any social and environmental responsibilities they can shoulder as long these additional responsibilities do not create a conflict between shareholders and directors. (5) The director of a company must prioritize the business's fiduciary duties to its stockholders before considering any alternative goals. (6)

In 1983, "constituency statutes" were created to combat the inflexible fiduciary duties of directors to their shareholders to "defend against a hostile takeover" of directors by a new wave of shareholders. (7) The purpose of these statues was to give directors a degree of discretion regarding what interests they wanted to prioritize. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.