So You Want to be a B Corp…
Our co-CEO and co-Founder, Joey, was honored to write a letter to other business leaders for B Corp’s Board Playbook, a practical guide for companies looking to adopt the highest form of stakeholder governance: DE Public Benefit Corporation. The Playbook is available for any Executives, Investors, and Directors who are starting to explore the idea of pursuing Public Benefit Corporation status as a requirement of B Corp Certification.
Fifty years ago, Milton Friedman published his famous essay in the New York Times stating that the role of the company is to ‘make as much profit as possible within the rules of the game.’ Since that time, not only has shareholder primacy, as the principles in the Friedman Doctrine have come to be known, become the singular guiding light for corporations, but these same companies have also eroded the rules of the game to allow companies to privatize profits while socializing their risks and externalities. This bias towards an unfettered version of capitalism has exacerbated inequality, hampered economic freedom for underrepresented groups, and enabled systematic warming of our climate.
There is, however, an alternative. Benefit governance forces executives to consider stakeholders such as the environment, employees, supply chain partners, communities where the business operates, and its customers, rather than maintaining a myopic approach of creating wealth for shareholders. This is better for the world, and better for shareholders also. Traditionally, institutional investors are funded largely by the pensions and retirement plans of working class people, yet these institutional investors have enabled companies to lobby for erosions to environmental, and employee- and community-friendly rights. They are cutting off their noses to spite their face! A stakeholder mentality benefits the world, recognizing that society helps to build businesses, and therefore obligates business to protect society. It is the right (economically and morally), and more balanced way to build a thriving and healthy society.
At Allbirds, we are incorporated as a Public Benefit Corporation in Delaware, and have stated that Environmental Conservation is the public benefit named in our charter. As a B-Corp, we take a broader set of stakeholders into consideration as we run the business; however, that is done on our own volition and is not a requirement of our PBC designation, albeit, a complimentary one. We have established a robust set of principles and processes internally to manage our commitment to stakeholders. We certify with B-Corp every three years. We also report quarterly to our board and leadership team on a range of employee, environmental, social and governance (EESG) topics. We have committed to be carbon neutral as a company since 2019, and do so by measuring, labeling our products with their carbon impact, reducing emissions through innovation and supply chain strategies, and offsetting any carbon (equivalent) pollution created by our company’s operations. Additionally, we’ve structured our leadership bonuses in such a way as to reward achievement of carbon reduction targets.
Adopting this governance framework has legal tradeoffs. On one hand, it provides broader latitude to executives to act on behalf of public beneficiaries in addition to shareholders. On the other hand, it also creates liabilities for companies and its executives such that investors can hold the company accountable to achieving the public benefits it has chartered in its governance documents. This is flexibility and accountability. Great leaders should have both, but it takes courage and a sense of responsibility for what the executive’s role is in the world.
Finally, one might wonder whether benefit governance is necessary, and given the wide latitude the business judgment rule gives executives in Delaware Corporations, it is a reasonable doubt. In considering this question, it is important to remember that company leadership changes. The only way to enshrine this approach into the genetic code of a company is to put it in its legal governance structures. This ensures generations of leaders uphold the obligation, not just to shareholders, but to society more broadly.
