The Mission-Driven Venture: Business Solutions to the World s Most Vexing Social Problems

Chapter 3Communities of InterestBenefit Corporations and Certified B Corps

“Why,” wondered Unilever's chief executive Paul Polman, in a recent interview with Guardian Sustainable Business, “would you invest in a company which is out of synch with the needs of society, that does not take its social compliance in its supply chain seriously, that does not think about the costs of externalities, or of its negative impacts on society?” The short answer is that the classical model of corporate law, as it has been interpreted by the state of Delaware's influential courts and elsewhere, emphasizes shareholder benefit. In turn, shareholders, it has been assumed, uniformly demand that their companies maximize profits notwithstanding the competing interests of employees, suppliers, customers, creditors, and communities. After all, it is the shareholders whose capital is at risk, and management should have no choice but to place their interests above all others' interests.

But the doctrine of shareholder primacy and its preoccupation with financial returns to shareholders is giving way to realistic demands for long-term sustainability. Under the “business judgment rule,” courts will generally show deference to any board decision made with the interests of the corporation and its shareholders in mind, even if those interests are long-term and tangential or attenuated, so long as the decision wasn't uninformed or made in bad faith. Today, in forty-one U.S. states, Delaware (where most public ...