By Stephen Poole
Posted on Freedom Advocates on August 17th 2011
When most people first hear about legislation to create a new type of corporation in which the directors must provide a “general public benefit” while being freed from bothersome constraints such as maximizing profit or considering the needs and concerns of shareholders, their usual response is, “So what? If people want to invest in a company that doesn’t care about making money, go ahead and let ‘em.”
I’ll admit that was my immediate reaction when I was told about the North Carolina Benefit Corporation Act, or SB 26, which is now in the House Judiciary Committee. Apparently it was also the reaction of many of our supposedly “conservative” Republican state senators: the Senate bill passed on a 50-0 vote.
But for some reason I couldn’t stop wondering about the legislation, and a Latin adage kept popping into my head: “Cui bono?,” which fittingly enough means “to whose benefit?” Anyone who’s studied the corrupt history of tax-exempt foundations and non-profit organizations knows immediately that the only reasons for such an open-ended and convoluted piece of legislation are that there’s money to be made, an agenda to be fulfilled, or both. This became even clearer when I discovered there’s absolutely nothing stopping corporations from drafting charters that would make them de facto Benefit Corporations by specifying that one of the corporate purposes is to create a “general public benefit” and then giving its director greater protections from profit-mad, torch-and-pitchfork-wielding shareholders.
So I went back to the text of the legislation and again read one of the key clauses:
“A benefit corporation shall have as one of its corporate purposes the creation of a general public benefit. A benefit corporation may include in its articles of incorporation other corporate purposes, including the purpose of engaging in any lawful business.”
Earlier in the bill we’re told what constitutes a “general public benefit:”
“A material positive impact on society and the environment, taken as a whole, as measured by a third-party standard, from the business and operations of a benefit corporation.”
In Part 2 of this series, I wrote about the only viable “third-party standard” currently in existence: the B Corporation™ created by a non-profit group called B Lab. When you examine what’s involved in garnering the cherished B Corporation™ designation – as well as the promises being made by the people that created the standard – you begin to realize this is simply a backdoor method of implementing Sustainable Development/Agenda 21 policy without our elected officials realizing what they’re approving.
It’s not clear whether or not SB 26 will require a Benefit Corporation to become a B Corporation™ under the aegis of B Lab, although I’m sure B Lab wouldn’t mind if that were the case. Here’s a look at how much it receives annually from companies that receive the B Corporation™ certification:
|Annual Sales*||Annual Certification Fee|
|$0 – $1,999,999||$500|
|$2 M – $4,999,999||$1,000|
|$5 M – $9,999,999||$2,500|
|$10 M – $19,999,999||$5,000|
|$20 M – $99,999,999||$10,000|
*Presumably this should read “revenue.” So much for B Lab’s “team of attorneys from three national law firms.”
Again, keep this in mind: a company can become a certified “B Corporation™” and do all the wonderful, beneficial things they want without any law being passed. In fact, in Step 3 of “Become a B Corporation” we read, “Begin adopting the B Corp Legal Framework: For most companies this will entail an amendment of corporate governing documents to incorporate stakeholder interests.” No mention of being in a state that has authorized Benefit Corporations, merely the factual statement that corporate governing documents can be amended to suit “stakeholder interests.”
Aside from coughing up the dough for the certification fee, becoming a B Corporation™ seems to be a pretty painless – and not very stringent – affair. It’s basically a six-step process: Take an “Impact Assessment,” have your answers reviewed, adopt the B Lab legal framework paperwork (the NC version is here), swear allegiance to the concept of “interdependence” and B Lab by signing a Term Sheet, document some of the answers on the Impact Assessment, and submit to onsite reviews. A few salient points about the process:
- B Corporations must provide documentation for only 10% of the answered questions on the Impact Assessment, and then only after they’ve been certified. When contacted by e-mail, B Lab would not confirm (i.e., they never responded) whether every company had to verify answers to the same 10% of questions, or if it was up to B Labs’ discretion as to which 10% had to be verified. If it’s the latter, a strong case could be made that B Lab has the power to make it easier for some companies to become B Corporations™.
- Onsite reviews “generally last between 4-8 hours depending on the size of the company.” It’s hard to believe that any type of comprehensive audit could possibly be conducted in this amount of time even at small to mid-size businesses, particularly given the nature of some of the questions in the Impact Assessment.
- The only way a company can fail an audit is “if B Lab staff determines that a company has intentionally misrepresented themselves in their survey answers.” But SB 26 doesn’t seem to place much importance on a Benefit Corporation actually creating… you know… benefits. An analysis of the legislation says “the director is… not liable for failure of the benefit corporation to create a general or specific public benefit.” If the director of the corporation isn’t liable for not creating the “benefit” that’s supposedly the purpose of the corporation, then who is???
And since this whole to-do is supposed to be about “general public benefits,” just what does the “Impact Assessment” consider those to be?
To gain certification, a company must score 80 out of a possible 200 points – but only 30 or so of those points are directly related to “benefits and services.” A look at the Sample Assessment on the B Lab Web site reveals just how vague an answer can be and still qualify as a “public benefit.” Respondents can avow direct or indirect impacts their products or services have on their customers in economic equality (for individuals and communities), environment, health, education (arts, science, and “knowledge”), and my favorite, “flow of capital to purpose-driven enterprises.” (I didn’t know Rick Warren had a hand in this!)
Check out these examples that qualify for each category, noting the italicized phrases and “industries:”
|Economic Equality (individual)||Direct: Job training, education, products that directly address economic equalities for the underserved Indirect: Educational toys|
|Economic Equality (community)||Direct: CDFI, low-income housing, utilities for “underserved” communities Indirect: YMCA, summer camps|
|Environment||Direct: Renewable energy, recycling technology, green building design and development, sustainable technologies Indirect: Products made from recycled or sustainable input (paper, cups, FSC certified, etc.)|
|Health||Direct: Disease prevention or cure, such as AIDS or other vaccines, cancer clinics Indirect: Products promoting healthy living (organic food, mountain bikes, etc.)|
|Education||Direct: Museums,photographers/artists, independent media,publishing, research labs Indirect: Intl. travel agent, book stores, sound equipment, fine jewelry|
|Capital investments||Direct: Fundraising for purpose-driven enterprises, socially responsible investing Indirect: Consulting to purpose-driven enterprises, ad agency for purpose-driven companies|
Would hip-hop mogul Russell Simmons’s pre-paid “Rushcard,” which is laden with fees and surcharges and which is aggressively marketed as “financial freedom for the underbanked,” count as a product directly addressing economic equalities of the underserved? Why wouldn’t it? Would a payday checking service qualify? Again, why not? How about an income-tax preparation service located in a low-income neighborhood? Seems like that would be good to go, too. And let’s not forget the “public benefits” created by photographers, publishers, international travel agents, book stores, audio component stores, fine jewelry boutiques, and of course “consultants for ‘purpose-driven enterprises.’”
I think you get my point – namely, that it takes just a little imagination to make almost any product or service have some type of impact in one of those areas, particularly given the leeway the standards’ creators have shown in the examples. And let’s not forget that a corporation’s answers to these questions might not even be included in the initial 10% that must be verified, or that a corporation could potentially go ten years before undergoing a full review from B Lab (“10% of B Corporations are audited every year – so in a two-year term, all B Corporations have a one in five chance of being audited.”)
But the glaring point here is that this section of the Assessment isn’t detailing the “general public benefit” referred to in SB 26. These are the specific public benefits a Benefit Corporation might elect to have in addition to the general public benefit it must have. You can tell at a glance by simply pulling up SB 26 and looking at � 55-18-3 (a) 7, which mirrors the above categories.
So our state legislature is considering a bill that allows a third-party to define a “general public benefit” when the phrase doesn’t even appear in the third party’s “standard” – which can only lead us to conclude that the Assessment as a whole defines “general public benefit.” And when we look at the various categories of the Assessment and how many points are available to be earned in each, we can see that B Lab’s idea of “general public benefit” is a bit different from what most of us might think of when we hear the phrase.
|Community (Suppliers, Local, Diversity, Charity||40|
|Consumers (Beneficial Products/Services)||30|
(Note: the totals here add up to only 180 instead of 200. Don’t blame me, blame B Lab – the math is screwy throughout the Sample Assessment.)
“Employees” deals with benefits, employee ownership, flex scheduling and career options and so forth – good for workers, yes, but certainly not “public benefits.” “Environment” is the usual claptrap you would expect: “carbon footprints,” renewable energy usage, water usage, “environmental benefit models,” etc. These might be public benefits if you believe the propaganda regarding global warming, peak oil, and other hysterical scenarios. Don’t think the Community section will necessarily reveal a lot of “general public benefits,” either. While some of it’s about donating to charities and hiring “underserved populations” such as women and minorities (particularly grating to this writer, a white male who’s been “underserved” by the “employment sector” for two years), a lot is about the supply chain and whether the Corporation is sourcing materials from environmentally conscious, “fair wage” type suppliers – i.e., other Benefit Corporations.
In short, the B Lab Impact Assessment – the “third-party standard” – isn’t really so much about a “general public benefit” as it is about Green Jobs, Green Energy, Social Justice, Economic Equality, and Racial and Gender quotas.
But after all this, we’re still left with the nagging question: Cui bono? Who benefits?
In the fourth and final (I promise) installment, the entire picture will come into focus. If you’re somehow still unconvinced this is a singularly bad piece of legislation, I strongly urge you to stay tuned for the grand finale. In the meantime, here’s a visual that might give you a hint what this is really all about.
Tonight’s suggested reading: “The Future is Calling” by G. Edward Griffin.
As a graduate of Wake Forest University, Stephen Poole emerged from that institution as a zombified collectivist incapable of critically analyzing the socialist shibboleths with which he’d been indoctrinated. After awakening to the untenable nature of his “beliefs,” he’s now a an individualist who believes in truly free markets, Constitutionally limited federal government, the eminence of personal liberty, and unalienable rights granted by God.
“Benefit Corporations: Expansion of the Public-Private Fascist State, Part 3” by Stephen Poole
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