PA "Benefit Corporations" Pledge to Give Back to Community
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A new law allows corporations to contribute to the community and be environmentally friendly without a legal repercussion from stakeholders. As of Tuesday, Pennsylvania became the 12th state to allow a company to file as a benefit corporation.
Department of State spokesman Ron Ruman said there's no difference from the state's perspective but there is a legal difference for a benefit corporation. Under normal circumstances, shareholders can sue a company for making a decision that impacts the company's bottom line by claiming the business is not complying with its fiduciary duty to the shareholder. As a benefit corporation, the company can implement policies that negatively impact its profits and be immune to a lawsuit if the policy benefits the community or environment in some way.
"Say [the company] wants to purchase energy from a utility using wind power to generate that electricity," Ruman said. "Maybe that costs a little more so maybe that'll take a little bit off their bottom line, but they can go ahead and do that because they're going to say that's better for the environment."
Ruman added there's no tax break or state incentive to be a benefit corporation.
"It's really a statement by the company that they feel that they want to do this as part of their everyday way of doing business," Ruman said. "Everything they want to do they want to have not only for their bottom line but also to give something back to the community either through the environment [or] through helping with the social fabric of their community."
Ruman said the law is part of a larger state initiative to attract and retain businesses in the commonwealth.
"There are entrepreneurs out there who want build, investors who want to want to finance, and consumers who want to do business with companies that have made this type of pledge and have written it into their corporate structure," Ruman said.
15 companies in the commonwealth registered to be benefit corporations Tuesday. Ruman said that's the most businesses in any state that have every registered on the first day.
To be considered a benefit corporation, businesses have to have two-thirds stakeholder approval and file a legal document amending its corporate structure accompanied by a $70 fee. Additionally, benefit corporations have to file annual statements to the shareholders and the state with details of how it is adhering to the principles of a benefit corporation. Ruman said there are no concrete guidelines for benefit corporations, but the company has to prove it's giving back to the community or environment.