Written on: July 22nd, 2013 in Effective & Efficient Government
On July 17, I signed into law a bill enabling the formation of a new type of corporation that is hard wired to compete to be the best in America at being the best for America.
These new Delaware public benefit corporations will harness the power of private enterprise to create public benefit. In the short term, they will create high quality jobs and improve the quality of life in our communities. In the long term, as many enter the public capital markets, they will help combat the plague of short termism that we have seen over the last five years can undermine a shared and durable prosperity.
Some of the most innovative and fast growing private companies in America — like eco-home care brand Method, organic baby food business Plum Organics, fair trade company Alter Eco, and green paper supplier New Leaf Paper — will be among the first to register as Delaware public benefit corporations on August 1st when this law goes into effect.
These businesses, and over 100,000 like them, are profitable, but consider profit to be the means — not the exclusive end goal — of their business. They see profits as a means to fuel growth in social impact as well as to generate attractive returns for stockholders.
Through meetings over the last several years with my staff, the Corporation Law Council of the Delaware Bar, and the Court of Chancery, it became clear that a new Delaware corporate entity was possible that can bring together these innovative business leaders and the investors who want to back them, while maintaining the high standards that are the hallmark of Delaware corporate law.
Many of the businesses considering this new corporate structure — like waste management firm Rubicon Global, e-commerce platform Etsy, and eyewear industry disruptor Warby Parker — feel understandably constrained by existing corporate law that recognizes only one legitimate corporate purpose — to maximize value for stockholders.
Delaware public benefit corporations will function like and enjoy all the same benefits as traditional Delaware corporations and they will have three unique features that make them potential game changers. These three features concern corporate purpose, accountability, and transparency.
The creation of Delaware public benefit corporations is a powerful, no cost, market-based solution to the systemic problem of short termism and an innovative approach to using market forces to solve our most challenging problems.
Because of Delaware’s leading role in U.S. corporate law, enactment of benefit corporation legislation in my state is critical for these businesses that seek access to venture capital, private equity, and public capital markets.
Public benefit corporations are not a replacement for traditional corporations in America. But as the next generation of publicly-traded companies comes into being, benefit corporations will be among them, helping to build public trust in business, and becoming an attractive investment opportunity for the growing number of investors who increasingly want to make money and to make a difference.
And that’s best for America.
This blog was originally published in the Huffington Post.