Tuesday, May 8, 2007

"B" Corporations get an A+

Adam Smith's dictum about "maximizing profit" has been mis-applied and misinterpreted and etched in the stone of public corporation charters and consequently binds corporations to "maximizing profit to shareholders" taken to mean "make the most money possible for the shareholders." That is, in fact, not what Adam Smith meant. Maximizing profit did not mean to put as much money as possible into the profit margin but rather use capital to its maximal advantage in the effective operation of the company. That means paying workers, maintaining machines and all the things that keep things running smoothly, hopefully happily along. "Maximizing profit to shareholders" under the new dogma will result in the sacrifice of other stakeholders. Enter the "B Company."

Enter the B Corporation. According to NPR's Marketplace story, "Profiting from Social Responsibility" by Alex Goldmark, A "B" Corporation is a new status for a for-profit corporation that writes into its charter, not simply that it MAY consider other stakeholders, but it MUST. The understanding is up front that the profits may be used for fair pay, benefits, hours, and conditions for workers; that the environment and community are considered; that some portion may be contributed to charity etc... Jay Coen Gilbert who is one of the pioneers of the concept says, "
The B is for social benefit. It's still a traditional company, but with a modified charter that legally binds it to a socially-conscious set of values."

It's time for the new(or is it old) attitude that businesses are not in the business of "making money" but of making products, offering services, and supplying human needs and to that end, creating prosperity and beneficial communities. It is time for us to ask, "what is an economy for?" The B Corporation is a wonderful indicator that more and more people are embracing the idea that economic prosperity is compatible with community values.

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