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Friends with Benefits

Could a new class of corporations rise above the bottom line in Colorado?



On Earth, as in heaven, nothing promotes an evangelical cause quite like a compelling tale of crossing over from the dark side into the light.

And when it comes to advocating on behalf of the fledgling "benefit corporation" movement, Blake Jones' story has all the right elements, beginning with his years as an in-the-field engineer for Halliburton, the Dick Cheney-affiliated corporate giant best known for its roles in the Iraq war and the Gulf oil spill.

"This is hard, because I don't want to bash Halliburton," says the 37-year-old founder of Namasté Solar, an employee-owned enterprise that has installed more solar systems in Colorado than any other company. "But Halliburton's main goal is to make a profit, and it was willing to do things that were not in the best interest of its employees, were not in the best interest of the countries where it did business, and were damaging to the environment, in order to make the best profit at all costs."

Over the course of five years with Halliburton, including two in Egypt, Jones went through a crisis of conscience over what he viewed as short-term profit motives trumping environmental and worker-safety issues.

"At Halliburton, there were a lot of things that I saw there that I didn't like," he says. "It was: 'Oh my god, we spilled this everywhere.' 'Yeah, well, we're not forced by this developing country to clean it up. That costs money, and that would hurt our bottom line, so we're not gonna do it.' Or: 'This many workers have died in the past month on these construction projects, that's intolerable, we should be buying more safety gear to prevent this from happening.' 'Well, it's easier to get away with here, so we're going to.'"

So Jones moved on to projects more in line with his personal values.

"I went to Nepal for three years and worked at a renewable energy company based in Katmandu, installing solar systems in remote villages throughout the Himalayas," says Jones. "That kind of marked my transition from the fossil-fuel, conventional-energy industry into the renewable energy industry. It was a transformative experience, like I guess you could say all of my jobs were."

Today, Jones and like-minded advocates want to see a similar transformation take place on a larger scale, through the passage of "benefit corporation" legislation that has, over the past two years, been enacted in seven states. And Colorado could be next.

"The Senate Democratic Caucus has indicated this is one of its highest priorities in job creation and economic activity," says state Sen. Bob Bacon, D-Fort Collins, who is about to reintroduce a bill to create a class of corporations that are not legally restricted to making decisions based solely on maximizing shareholder profits.

While the directors of traditional corporations can be sued by shareholders for not making the bottom line their sole priority, benefit corporations factor social and environmental concerns into the decision-making process. As described in SB 11-005, the benefit corporation bill Bacon sponsored in 2011, such companies provide a "specific public benefit" that can include:

• providing low-income or underserved individuals or communities with beneficial products or services;

• promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;

• preserving the environment;

• improving human health;

• promoting the arts, sciences or the advancement of knowledge;

• increasing the flow of capital to entities with a public benefit purpose;

• and conferring any other particular benefit on society or the environment.

B Corp beginnings

While Maryland became the first state to legally recognize benefit corporations in 2010, companies around the country — including Jones' Boulder-based Namasté — have been obtaining certification as "B Corps" since 2006. While often confused with benefit corporations, certified B Corps face the same legal restrictions as any other corporation. As such, the categorization is more a form of branding than a form of legal protection.

Even so, more than 500 companies in some 35 states have already received certification from B Lab, the Pennsylvania-based nonprofit that owns trademarks on the term "B Corporation" and the slogan "The Change We Seek." Currently, there are 17 certified B Corporations in the state of Colorado.

Among them are two Colorado Springs-based companies, the Paradigm Project and First Affirmative Financial Network, each with goals closely aligned to those outlined in Bacon's bill. In the case of the Paradigm Project, the company's mission is to develop sustainable businesses in poverty-stricken communities around the globe, while First Affirmative Financial Network handles investment portfolios for clients who want to support companies that engage in socially and environmentally responsible practices.

To become a B Corp, a company must pass B Lab's certification process and, depending on the size of the company, pay fees ranging from $500 to $25,000. In exchange, the company can display the "B Corporation Seal," a B in a circle that indicates the company has met B Lab's standards for addressing social and environmental concerns.

Companies like Namasté see it as a worthwhile expenditure. "Before B Corps came along, we had thought we were alone," says Jones. "We didn't know that we were part of a growing movement. And so we wanted to become a B Corporation in part because that's exactly what we're about. We just didn't have a name for it."

Jones believes the designation also has more practical applications. "We're gonna start looking for external investors this year, and we've already found that being a certified B Corporation makes it easier to communicate to them who we are, what we're about, and that we're serious. And it's the same thing with customers: They want to know, are you just greenwashing? Are you just talking the talk, or are you walking the walk?"

A B Lab stamp doesn't mean any tax advantages — and actually, neither would "benefit corporation" status at the state level. But from a legal perspective, the latter would provide protections the former cannot. According to B Lab director of policy Erik Trojian, even closely held corporations, which have considerably less risk of being sued, are advocating on behalf of benefit corporation legislation, because they want to seek out additional investment dollars.

"I know companies out there that will not grow until this law is passed in their particular state, and gives them the freedom to go out and seek additional investors," says Trojian. In states that have yet to enact benefit corporation laws, he says, "every time I go out and get a new investor, I'm making myself susceptible to a shareholder lawsuit."

Jones set out to reduce that possibility by changing Namasté's articles of incorporation, approved by a unanimous stockholder vote, in a way that spells out its socially conscious agenda.

But without benefit corporation legislation, the risk of a lawsuit, however small, still persists. And with it, Jones believes, comes a deterrent effect that can dampen a company's best intentions.

"Ben & Jerry's was one of the most celebrated, inspiring, socially responsible companies out there," says Jones. "But the company got an offer to be bought out by Unilever, and it was for a price that would make all the stockholders a lot of money instantaneously."

Founders Ben Cohen and Jerry Greenfield were reluctant to sell, he says, for fear that a multinational corporation would compromise the company's original mission. But in the end, they were more scared to say no.

"Getting sued just sucks," says Jones, who's never had the pleasure. "Even if you win the suit, who wants to go through two years in court?"

Crossing the bar

One group that's not advocating on behalf of benefit corporations is the Colorado Bar Association.

"Basically, our concern is that it gives the directors of these benefit corporations a blank check, which shareholders may not want to do," says Herrick Lidstone, one of the attorneys addressing the legislation on behalf of the association. "If there's someone defining what is socially good or what the purpose of this entity ought to be, it ought to be the owners of this entity."

In terms of more specific complaints, Sen. Bacon says this year's version of the bill will address at least one of the obstacles raised last year.

"One of the concerns lodged by the Bar Association was dissenters' rights, which we have incorporated into it this year," says Bacon. "If a corporation that's already chartered decides to become a benefit corporation, and two-thirds of the shareholders vote to do so, the third that did not vote to do so are dissenters and will be able to be bought out at the market value of their shares."

But Bacon dismisses another of the association's objections, one that specifically involves B Lab.

On Feb. 20, Lidstone and two of his associates followed up on a meeting with state Sen. Morgan Carroll, D-Aurora, by sending her a "fact sheet." It argues that, if the bill is adopted, "the Colorado General Assembly will impose a new requirement (the requirement of a 'public benefit') on organizations seeking to create any social or economic benefit, and then delegate the duty of determining 'public benefit' and 'public good' to an outsider certifying agency.

"At present," the document continues, "the only such organization of which we are aware is B Lab, the driving force behind this legislation and an entity that trademarked the (B) symbol, available to qualifying companies at prices up to $25,000 a year."

Bacon says that's simply not true. "The bar association — either purposefully or erroneously — assumed that any benefit corporation had to be certified and therefore had to pay money for someone to certify it." Instead, says the senator, companies can select their standards from "a menu of third parties."

And while B Labs is on that menu, Trojian says his company doesn't profit from their use, despite what one might infer from the Bar Association's citation of its pricing: "You get to choose any third-party standard that meets the requirements of the statute," he says. "And you can use B Lab's standard for free, but you just can't claim you're a certified B Corp."

But even if its other objections are already being addressed, the bar association has a more fundamental argument. According to Lidstone, companies already have a way to address societal concerns.

"Target, I think, contributes 5 percent of its local profits to local elementary schools," he says. "You pay more for a Chipotle burrito than you do for a Taco Bell burrito because it's all organically and humanely grown. People are doing all this stuff anyway, but it's called marketing."

Besides which, Lidstone adds, there's a readily available solution for companies who want to limit their risks. "I can't tell you how many businesses owners I talk to who have formed their own business because they can do it for 50 bucks on the Secretary of State's website, but they don't properly organize the business with articles of incorporation properly drafted with a shareholder agreement to anticipate possible shareholder disputes."

In fact, Lidstone says that nearly all the members of the committee that's reviewing benefit corporation legislation, himself included, are transactional lawyers who specialize in legal documents. "If you want a benefit corporation, as with almost any corporation, you probably want to come talk to one of us so we can draft it properly for you."

Brought to you by ...

Ironically enough, when it comes to corporate marketing in public schools, there's a B Corp for that.

Education Funding Partners bills itself as "the only national-scope, social enterprise that provides Fortune 500 corporate marketing sponsorships exclusively for major public school districts." The Colorado company's website tells the story: One photo shows a "Kellogg's auditorium," in which the company's distinctive cursive logo looms next to a baby grand piano. Signage on a pillar in the middle of a dining hall informs students that this is a "Staples Cafeteria." A squad of cheerleaders holds up a banner for CVS-sponsored flu shots.

More impressive still is the image of a two-story-high sign that says "JEFFERSON HIGH SCHOOL AUDITORIUM SPONSORED BY KELLOGG'S," which shares the same page with the trademarked "B Corporation Seal" that the bar association's Lidstone sardonically likens to a Good Housekeeping Seal of Approval.

Elsewhere on the site, a testimonial from Dr. Pat Jaurequi, recently retired superintendent of the San Juan Unified School District in California, suggests why public school administrators are embracing corporate sponsorship: "Our community has rightfully encouraged us to look at creative opportunities for generating new revenue. Our partnership with Education Funding Partners will allow us to access some of the largest corporations in the country."

It says something about the demoralization of a cash-strapped school district when its supervisor is forced to seek corporate sponsorship and views it as rightful encouragement. Still, is there a point where such controversial measures offset the economic benefits that come with them?

"It's always up to the school district to determine if that's a right fit for them or not," says Trojian, when asked about Education Funding Partners' mission. The B Lab director says he's "not really here to comment on what a business does or does not do," but assures me that the company "will be able to easily address that question for you."

As it turns out, Education Funding Partners declined requests for an interview. Instead, the Denver-based company referred questions to an outside publicity company, Voss & Associates, headquartered in Florida.

For his part, Voss president David Voss is upbeat about the direction in which EFP is heading. "At this point in time, they're working with school districts representing over a million enrolled students throughout the country," he says. "We have a huge shift going on in school districts, from first being reluctant to do corporate sponsorships to being very receptive to it."

While the two-year-old company presents its corporate sponsorships as "a real and sustainable solution to the public education funding crisis," Voss rejects the idea that such measures could be used to help justify further reductions.

"Corporate sponsors want to do good, but they can't make up for tax-supported schools — they can't even come close," says Voss. "If you look at the numbers, it's just a shallow argument."

But will that keep critics of public school funding from using it?

"Well, people may use it," answers Voss, "but it's not a valid argument."

At the close of the interview, Voss asks that we not use the images of the Kellogg's cafeterias and Staples-sponsored high schools that appear on the company's website. As it turns out, they're mocked-up examples to show prospective clients what's possible. The only corporate client to date is CVS Pharmacy.

"The mock-ups are OK in a little slideshow," says Voss, "but I definitely wouldn't publish them. They could get us both in trouble."

Uncommon threads

Education Funding Partners and the Colorado Bar Association may be convinced that profit-driven corporate largesse is the way forward, but Sen. Bacon takes a more skeptical view.

"Many of those companies, whether you're dealing with Target or Wal-Mart or McDonald's, their charitable contributions are in the realm of marketing," Bacon says. "They're trying to create a goodwill for additional profit-making, rather than a clearly stated mission of trying to improve society."

Still, as the differing approaches of B Corps like Namasté and Education Funding Partners suggest, the definition of a "specific public benefit" may be somewhat lacking in, well, specificity.

"The common thread is not necessarily as common as you would think," says Trojian. "One company could score tremendously well in environment, but not so well in employees. And then another company could do differently."

One thing the 500-plus existing B Corps do have in common, he says, is that when their scores in five areas of evaluation are tallied, they total at least 80 out of a possible 200. "So a company might not do well under employees or under the environment, but their scores and their report are available for the public to see [on company websites]. And so the common thread is we want to do an overall standard for social and environmental performance. And we want to be transparent about it — and that's what ties all of them together."

So exactly how well would Halliburton have to treat its employees to compensate for its environmental track record?

"Well, it all depends on the other areas," says Trojian with a laugh. "And in the areas where they score the highest, we do require document verification. There are companies out there that have this particular image of not being very good, but they're usually not very good across the board."

Even without Halliburton onboard, the B Lab director is optimistic about the future of the benefit corporation model in Colorado and other states where it may soon be adopted.

"This is extremely bipartisan legislation," he says. "The floor votes nationwide are 892 ayes to 62 nays. In fact, I just found out that the legislation was introduced in South Carolina by a Republican who's a graduate of Bob Jones University. Totally conservative. Most people think this is pretty liberal legislation, but it's not. It's just a free-market approach, saying, 'Let a company do what they want to do.'"

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