By JULIE MIANECKI
Capital News Service
LANSING – People, planet, profit.
Those are the three elements of a so-called “triple benefit corporation,” a new corporate structure that Michigan would recognize under a bill by Rep. Vicki Barnett, D-Farmington Hills.
The primary goal of a traditional for-profit corporation is maximizing profits, while making the most profit would be only one of three equal pursuits for a triple benefit corporation. The other two would address actions that create social and environmental benefits, such as high employee salaries and benefits or working with environmentally friendly materials.
“Maximizing profits is on an equal footing with planet sustainability or adequate wages to support a middle class – they want their employees to get paid sufficient dollars with sufficient benefits so that they can live a wonderful lifestyle and raise their children and send them to college,” Barnett said.
The bill would also recognize public benefit corporations, for which profit is secondary to a primary goal of social or environmental benefit.
Similar bills have passed in Vermont and Maryland and are being considered in New York.
John Batdorf, president of Rochester-based MI Green Team Inc., said he strongly supports the legislation.
His for-profit company promotes environmentally friendly lifestyles and practices by connecting diverse groups, including nonprofit agencies and the government, into a network that provides public programs and events.
“We’re very pro-enterprise, and we want to conduct ourselves with the motivations and methods that for-profit companies do, because having volunteers manage and control efforts on a part-time basis is really a difficult way to do big projects,” Batdorf said.
Barnett said the legislation is necessary because for-profit companies open themselves to shareholder lawsuits if they don’t put profits first, and the nonprofit format doesn’t fit companies that want to combine profit with social responsibility.
“They may have to make decisions that are contrary to their benefit ideals,” Barnett said. “For example, Ben & Jerry’s Ice Cream. When Unilever gave them a buyout offer of $43 and change per share, even though it was going to destroy their mission as a company, because they had to maximize shareholder value, they had to sell.”
Ben & Jerry’s is based in Vermont and is known for its commitment to employee benefit and compensation.
Barnett said many consumers are attracted to companies that pursue public benefits such as Tom’s Shoes, a California-based company that donates a pair of shoes for every pair it sells.
“The reason why people buy Tom’s Shoes is because they know they’re going to give a pair away,” Barnett said. “They want to be a part of this great social experiment of social responsibility and sustainability and giving back to society and not just taking.”
Therefore, as public-benefit-oriented companies attract customers, a state that permits the new structure will attract companies with ideals that fit the mold of the triple or public benefit corporation, Barnett said. In turn, that would create jobs and economic growth in Michigan.
Batdorf of MI Green Team said he would choose the triple benefit format for his company if the option becomes available. “If it gets enacted, we’d be first in line to take advantage of it.”
While companies such as his appear eager to see the legislation pass, some business law specialists said they’re apprehensive.
“Concerns would arise from difficulties of enforcing the public benefits concept, deciding what standards would apply and whether those standards would be subject to review by a non-governmental third party,” said Robert Wilson of Bloomfield Hills, council chair of the State Bar’s business law section.
Justin Klimko of Detroit, chair of the section’s corporate laws committee, added that he has additional concerns about the duties of company directors and a company’s responsibility to its investors under such arrangements.
“The board’s primary responsibility is to the shareholders as a group and to the company,” Klimko said. “With this action, it can consider other constituencies even to the point of harming the shareholders – it doesn’t say that specifically, but the implication is there.
“I’m not convinced that the bill doesn’t have a bunch of problems with it,” he added.
Rep. Barnett acknowledged that her proposal as drafted has several problems, and said she’s working with the State Bar and other groups to correct them.
“We want to work to make the bill right,” Barnett said. “People are rushing forward to help us. It’s created a lot of excitement.”