Popular Topics
All Topics
- "Gun Jumping"
- "Test-the-Waters" communications
- 2016 SEC Agenda
- ABL
- Accelerated Filer
- Accelerated filers
- Access to Capital and Market Liquidity Report
- Accounting
- Accredited investor
- Advance Notice Bylaws
- Airbnb
- Alternative Trading Systems
- Annual meeting
- Annual reports
- ASC Topic 740
- Asset Management
- asset-based loan
- ATS
- Auction IPOs
- Audit committee
- Auditor attestation
- Authentication document
- BlackRock
- Blank-check companies
- Blockchain
- blue sky
- Board committees
- Board Diversity
- Board independence
- Board of Directors
- Boilerplate
- Boilerplate in securities documents
- borrower
- Broker-dealer
- Broker-dealer registration
- Broker-dealers
- Calculation of Registration Fee
- California
- California Assembly Bill 979
- Capital formation
- capital markets
- Capital raising
- CEO letters
- Certified B corporation
- Chair Mary Jo White
- Chairman’s letters
- Chairperson’s letters
- Climate Change
- coal companies
- coal company IPOs
- coal miners
- coal mining
- collateral
- Columbia Law School
- Commencement of an offering
- Compensation sharing
- Compensatory offerings
- Compensatory sales
- Compensatory securities
- Compensatory securities offerings and sales
- Compliance and Disclosure Interpretation 110.02
- conditions precedent
- conference
- Confidential filings
- Confidential information
- Confidential treatment
- Confidentiality agreements
- coronavirus
- Corporate Governance
- Corporate Law
- Corporate social responsibility
- Corporate social responsibility: CSR
- Corporate Stock-Givaway Program
- covenants
- COVID-19
- credit agreement
- Crowdfunding
- CSR
- Cyber breach
- cyber incident
- Cyber risk
- Cyber-attack
- cybersecurity
- DAO
- December 31 Fiscal year end
- Decimalization
- Definition of a Security
- Delaware corporate law
- Delaware Law
- Delaying amendment
- Description of Business
- Designer stock
- Digital Advertising
- Digital securities
- Direct listings
- Direct marketing programs
- Direct response marketing
- Director Nominees
- Director Questionnaire
- Directors
- Disclosure
- Disclosure and Reporting
- Disclosure Effectiveness Initiative
- Disclosure Obligations
- Disclosure Regime
- Disclosure regulation
- Disclosure Requirements
- Disclosure Rules
- Disclosure simplification
- Disclosure updates and simplification release
- Diversity
- Dodd Frank
- Dodd-Frank Act
- Domino's Piece of the Pie Rewards
- Domino's Pizza
- Donald Trump
- Dual Class Shares
- Dual-class Capitalization
- Dual-Class Common Stock
- Dual-class shareholder voting
- Due diligence
- earnings guidance
- Economic Growth, Regulatory Relief, and Consumer Protection Act
- EDGAR Filing Manual
- EGC
- Electronic signatures
- Emerging growth companies
- Emerging Growth Company
- engagement letter
- environment, social and governance
- Equity Market Structure
- ESG
- event of default
- events of default
- Exchange Act
- Exchange Act Rule 12b-2
- Exchange listing
- Exchanges
- executive compensation
- Exempt offerings
- Exempt securities offerings
- Exhibits to Registration Statement
- FAST Act
- FDA
- Female
- Fictitious regulators
- Filing review comments
- financial forecasts
- Financial intermediaries
- Financial sophistication
- Financial statements
- Financing Alternatives
- Finders
- Finders exception
- Finders exemption
- FINRA
- First-day pop
- Five-factor test
- Form 10-K
- Form 10-Q
- Form D
- Form S-1
- Form S-3
- Form S-4
- Founder’s letters
- Fraudulent activities
- Free Stock
- Free Stock Offerings
- FTC
- General Motors Co.
- General solicitation
- Glass Lewis
- Golden Leashes
- Greenlight Capital, Inc.
- Hart-Scott-Rodino
- HSR Act
- Impersonators of genuine firms
- Incorporation by reference
- Indications of Interest
- Influencer Marketing
- Information asymmetry
- Initial coin offering
- Initial listing requirements
- Initial public offerings
- Insider Trading
- Integration
- interest
- Interest rate system
- Interest rates
- Intrastate offerings
- Investment banking
- Investment Company Act
- Investor Advisory Committee
- Investor Alert
- IPO
- IPO disclosure
- IPO drawbacks
- IPO pricing
- IPOs
- ISS
- Item 101
- Item 103
- Item 103 of Regulation S-K
- Item 105
- Item 401 of Regulation S-K
- Item 501(b)(7)
- Item 601(b)(24) of Regulation S-K
- James Mackintosh
- JOBS Act
- Ken Langone
- Large Accelerated Filer
- Larry Fink’s 2019 letter to CEOs
- Legal proceedings
- lender
- LGBTQ+
- LIBOR
- line of credit
- loan agreement
- Loan Agreements
- Loan transactions
- Loans
- Loyalty Programs
- Lyft, Inc.
- MAE
- Management
- management disclosure and analysis
- Management; Executive officers and directors
- Mark Cuban
- Material contract exhibits
- Material nonpublic information
- MD&A
- Mergers & Acquisitions
- Modernization
- Multi-Class Shares
- NASDAQ
- Nasdaq Independence Rules
- Nasdaq Listing Rules
- Nomination Letter
- Non-accelerated Filer
- Non-GAAP Financial Measures
- NSMIA
- NYSE
- Offering fees
- Offering statement on Form 1-A
- Offering statement on Form C
- Ordinary Course Covenant
- OTC
- OTC Market Group
- OTC Pink
- OTC quoted companies
- OTCQB
- Paid-for Research
- pandemic
- Pay Ratio Disclosure
- Pay Ratio Rule
- perfection certificate
- Periodic reports
- Perpetual dual-class stock
- Power of Attorney
- Prescriptive-based disclosure
- Primary issuances
- Principal Executive Offices
- Principles-based disclosure
- Private Equity
- Private fund knowledgeable employees
- Private placements
- Prof. John C. Coffee, Jr.
- Proposed Rule 5605(f)
- Prospectuses
- proxy advisory firms
- Proxy Contests
- Proxy fights
- Proxy materials
- Proxy statement
- Proxy voting
- Public benefit corporation
- Public Companies
- Public company acquisitions
- Public Float
- Public M&A
- Public offerings
- Purpose & Profit
- Purpose of the corporation
- Qualified institutional buyer
- Reference interest rates
- Reg S-K
- Registered offerings
- Registration Filing Fee
- Registration statement
- Registration statements
- Regulation A activity
- Regulation A+
- Regulation Crowdfunding
- Regulation D
- Regulation FD
- Regulation of finders
- Regulation S
- Regulation S-K
- Regulation S-K Item 10(f)(1)
- Regulation S-T
- Regulations S-K
- Regulatory Entrepreneurship
- Release No. 34-90112
- Reporting Category
- representations
- resource extraction antigraft rule
- restricted stock
- Reverse mergers
- revolver
- Rights offerings
- Risk Factors
- Rule 10b-5
- Rule 10b5-1 plan
- Rule 144A
- Rule 14a-4
- Rule 163B under the Securities Act of 1933
- Rule 21F-17
- Rule 24b-2 under the Securities Exchange Act of 1934
- Rule 253(f)
- Rule 302(b)
- Rule 4(a)(2) offering
- Rule 406 under the Securities Act of 1933
- Rule 473 under the Securities Act of 1933
- Rule 483 under the Securities Act of 1933
- Rule 506(b)
- Rule 506(c)
- Rule 701
- S&P Dow Jones
- Safe Harbor
- SAFEs
- Sarbanes-Oxley Act §404(b)
- Say-on-Pay Frequency Vote
- SEC
- SEC approval of offerings
- SEC Comments
- SEC Commissioner Robert J. Jackson Jr.
- SEC disclosure
- SEC disgorgement
- SEC Division of Economics and Risk Analysis
- SEC Filing Deadlines
- SEC Filing Reviews
- SEC Form 10
- SEC Office of Investor Education and Advocacy
- SEC Release No. 33-10591
- SEC Report of Investigation
- SEC Rule 152
- SEC shutdown
- Section 11(a) of the Securities Act of 1933
- Section 21F
- Section 8(a) of the Securities Act of 1933
- securities
- Securities & Exchange Commission
- Securities Act
- Securities Act of 1933
- Securities Act Rule 257
- Securities Act Rule 405
- Securities Act Section 17(b)
- Securities Exchange Act
- Securities Exchange Act of 1934
- Securities litigation
- Securities offerings
- securities transactions
- Severance Agreements
- Sexual harassment
- Sexual misconduct
- Shareholder Activism
- shareholder activists
- Shareholder nominations
- Shareholder rights
- Shareholder voting
- Shareholder Voting Rights
- Signatures in Registration Statement
- Simple Agreement for Future Equity
- Small business
- Small-cap
- Small-cap Companies
- Small-cap Issuers
- Smaller reporting companies
- Smaller reporting company
- Snap IPO
- Social Capital Hedosophia
- Social Media
- Social Media Marketing
- SOFR
- SPAC
- SPAC's
- Special Purpose Acquisition Company
- Special situations
- Spin-offs
- Sponsorship
- Spotify
- SRC
- Staff Accounting Bulletin (SAB) No. 118
- Staleness date
- Startups
- State securities laws
- stock options
- Stock Ownership Guidelines
- Stock Promotion Schemes
- Strategic spin-offs
- Sunset provisions
- Supreme Court
- Sustainability
- Switch, Inc.
- T+2
- Targeted stocks
- Tax Cuts and Jobs Act
- Tech IPOs
- Tech M&A
- Tech unicorns
- term loan
- term sheet
- Termination or Completion of an offering
- The CLS Blue Sky Blog
- The Wall Street Journal
- Third Party Payments
- Tick Pilot
- Tick Size
- Tick Size Pilot Program
- Tick Sizes
- Token sales
- Tracking stocks
- Trade Settlement
- Trading
- trading platforms
- Transaction-based compensation
- U.S. dollar LIBOR
- U.S. federal income tax reform
- Uber Technologies, Inc.
- Underrepresented Minority
- Underwriting allocations
- Underwriting fees
- Undisclosed Fees
- Unequal Voting Rights
- Universal proxy ballots
- Unregistered finders
- Unregistered offerings
- Unregistered Soliciting Entities
- Uplisting
- US Supreme Court
- Use of boilerplate
- venture capital
- venture capital investors
- venture capital terms
- Venture exchanges
- Verification of accredited status
- Virtual currency
- voting control
- voting power
- warranties
- Whistleblower Program
- Whistleblowers
- “Tandy” Representations
- “Testing the Waters”
Recent Posts
- Leadership Change at the SEC: What Activists Could Expect from Gary Gensler and the Biden Administration
- Delaware Chancery Court Provides Important Guidance on COVID-19’s Impact on a Buyer’s Obligation to Close:
- New York State Updates State Securities Regulations
- Nasdaq Proposes New Listing Rules Related to Board Diversity
- SEC Adopts Amendments to Permit the Use of Electronic Signatures for SEC Filings
- The SEC Rebuilds the Integration Principles Guiding Concurrent Private and Public Offerings of Securities
- The SEC Proposes a Safe Harbor for Permissible Capital-Raising Activities by Unregistered Finders
- SEC Issues 100th Whistleblower Award Just Days after Adopting Amendments to Whistleblower Program
- SEC Reduces Registration Filing Fee Beginning in October 2020
- The SEC Amends Regulation S-K Disclosure Rules to Empower Companies to Determine What and How Much Disclosure is Appropriate for Shareholders and Investors
Archives
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
Contact Us
(212) 451-2300
www.olshanlaw.com
Public Benefit Corporations and Certified B Corporations: Adding Transparency into a Corporation’s Ideological View on its Role in Society
Younger companies increasingly seek clarity into their corporate social responsibilities by adopting a public benefit corporation structure and opting to be designated as a certified B corporation.
Quite a bit has been written recently about the proper purpose of corporations and, in particular, public companies. Prominent corporate lawyers like Martin Lipton and law professors such as Adam Winkler of UCLA Law School have expressed their views as to whether the purpose of a corporation is to generate profits for its shareholders or to operate in the interests of all of its stakeholders, including employees, customers and local communities.
What is generally not known on the “street,” however, is how a particular company’s leadership lines up on this ideological divide. In other words, does the company’s board of directors follow the “Chicago School,” in which the social responsibility of a corporation is to increase its profits as the basis for its governance, or the broader stakeholder theory that integrates social, environmental and other sustainability considerations into its corporate governance? Despite state laws and court decisions on the fiduciary duties of directors (including in the case of being the target of a takeover) to shareholders, a corporation’s leadership still maintains significant discretion with regard to business judgments in these corporate social responsibility areas.
To clarify this apparent lack of transparency into a corporation’s boardroom, a number of younger companies are specifically aligning themselves with the ESG (environment, social and governance) movement and adopting the legal status of a “public benefit corporation.”
A public benefit corporation is a relatively new type of for-profit corporation with an expressed commitment to abide by high standards of corporate purpose, accountability and transparency in order to make a positive impact on society. According to various websites, 35 states including New York and Delaware, and the District of Columbia, have enacted public benefit corporation provisions in their corporate statutes to allow for this class of corporation. There are several publicly traded public benefit corporations, including Laureate Education Inc. and, until recently, Etsy Inc. Additionally, there are numerous public benefit corporation subsidiaries of public companies like Athleta, a subsidiary of The Gap, Inc., as well as subsidiaries of Campbell Soup Company, Chegg, Inc., Overstock.com, Inc., Salesforce.com, Inc. and United Therapeutics Corp.
Independent of a company’s status as a public benefit corporation under state law, a corporation may also elect to have its social and environmental performance, accountability and transparency assessed against proprietary criteria established by an independent organization such as B Lab. After a successful review and assessment, B Lab designates a corporation as a “Certified B Corporation” under its standards, which refers to companies that are certified by B Lab as meeting certain high levels of social and environmental performance, accountability and transparency.
Under state public benefit corporation laws, public benefit corporations are required to identify in their certificate of incorporation the public benefit or benefits they will promote, and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the shareholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in the public benefit corporation’s certificate of incorporation. Representative examples of public benefits provided in a certificate of incorporation include providing low income housing, promoting economic opportunities for individuals and communities beyond job creation, protecting the environment, operating recycling rewards programs in local communities, promoting the arts and sciences, funding companies with a purpose to benefit society, promoting innovation in and access to education, and improving human health and nutrition. The corporation’s stated public benefit is typically rooted in a company’s “mission,” which is a common disclosure in an IPO registration statement.
Although there may be ideological differences, holders of shares of public benefit corporations have voting, dividend and other economic rights that are the same as the rights of shareholders of a corporation that is not designated as a public benefit corporation. An investment in a public benefit corporation does not differ from an investment in an entity that does not have that status. In its certificate of incorporation, a public benefit corporation may limit the liability of its directors for breaching their duty of care like any other corporation, and may even extend that exculpation by including a provision that any disinterested failure by a director to satisfy the shareholder/public benefit balancing requirements will not constitute an act or omission not in good faith, or a breach of the duty of loyalty.
Public benefit corporations are required by state law to publicly disclose a report at least biennially on its overall public benefit performance and on the corporation’s assessment of its success in achieving the corporation’s public benefit purpose. Some states such as Delaware permit a corporation’s board of directors to measure the corporation’s public benefit performance against the objectives and standards the company sets for itself, while other states require an objective third-party standard such as that established by B Lab.
Becoming a certified B corporation involves taking and passing a B Impact Assessment, a comprehensive and objective measure of a business’ positive impact on society and the environment. The assessment varies depending on a company’s size (number of employees), sector and location. The standards in the assessment are created and revised by the Standards Advisory Council, an independent governing body that determines eligibility to be a certified B corporation. By completing a set of over 200 questions, which are customized for the company being assessed, that reflect impact indicators, best practices and outcomes, a company receives a composite score on a 200-point scale representative of its overall impact on its employees, customers, communities and the environment. Representative indicators in the assessment range from payment above a living wage, employee benefits, charitable giving/community service and use of renewable energy. Certification as a certified B corporation requires that a company achieve a reviewed score of at least an 80 on the B Impact Assessment. The review process includes a phone review with B Lab staff, a random selection of indicators for verifying documentation and a random selection of company locations for onsite reviews, including employee interviews and facility tours. Limited liability companies can also be certified by B Lab as long as the company’s operating agreement includes the required level of social responsibility.
The creation and expansion of the public benefit corporation structure and certified B corporation designation represents an evolving counterbalance to the traditional notions about corporations and shareholder primacy. This progress, supported by momentum towards social impact investing among the millennial generation, may ultimately lead the SEC to consider a more comprehensive approach to non-financial reporting of material information. For publicly traded public benefit corporations, where the two aspects of performance, financial and benefit, define the company’s mission, integrated (financial and benefit) reporting with respect to the achievement of its stated benefit might include the percentage of revenue derived from the stated benefit activities, percentage of stakeholders receiving a stated benefit and percentage of expenses spent towards achieving the benefit. Other information might include the geographic coverage and duration of its benefit activities and the impact of the company’s activities on its targeted stakeholders. Absent a check-the-box shareholders vs. stakeholders statement on the cover page of SEC periodic reports, the foregoing disclosure would add transparency into a corporation’s ideological view on its role in society.