August 1, 2013 marks a giant step forward in the creation of a sustainable global economic system and in the evolution of human consciousness.
Delaware just raised the global standard for corporate responsibility with its new public benefit corporation law. The law, which goes into effect today, authorizes the formation of corporations endowed with a comprehensive corporate conscience that protects the interests of society and the environment in addition to those of stockholders. By joining 18 other US states that have already adopted similar legislation, Delaware signals to the global economic system that the era of sustainable and conscious business has officially begun.
The new law accelerates the paradigm shift towards sustainability occurring in the global economic system and presages a second paradigm shift towards higher levels of consciousness in business.
Benefit corporations provide the legal foundation to replace the prevailing corporate paradigm where corporations exist solely to maximize profit for stockholders. In the emerging paradigm, corporations exist to optimize profit and provide a material positive impact on society and the environment.
Benefit corporations also provide the legal architecture to support a second paradigm shift to higher levels of consciousness in business. The collective consciousness of a benefit corporation, which inculcates a triple-bottom line conscience that balances profit, people and planet, naturally expands from being egocentrically aware solely of its needs to also being aware of the needs of society and the environment. Expanding a corporation’s conscience from a narrow focus on the pecuniary interests of stockholders to including the interests of all of its stakeholders leads to an altruistic planetary consciousness. This new legal framework enables corporations to become powerful and rapid change agents not only for the creation of a sustainable global economic system but also for the evolution of consciousness. These laws will change the world.
A beautiful thing about Delaware’s public benefit corporation law is its simplicity. A Delaware public benefit corporation is identical to the common Delaware corporation except for a few voluntary opt-in provisions. Few changes in behavior are required of directors and officers because the new law builds on the established body of corporate and case law.
The new law imposes a tri-partite balancing requirement on directors to balance: (i) the traditional pecuniary interests of stockholders; (ii) the interests of those affected by corporate behavior; and (iii) the one or more public benefits adopted by the corporation in its charter. Directors of public benefit corporations have an additional fiduciary duty to their stockholders to balance these three purposes.
This tri-partite balancing requirement and directors’ broadened fiduciary duties will cause corporations to act as responsible global citizens. In addition, directors and officers of public benefit corporations will naturally develop a planetary consciousness by applying the balancing requirement in everyday corporate governance.
Delaware’s adoption of public benefit corporation legislation is a big deal because Delaware is the world’s most respected jurisdiction of incorporation. It is the jurisdiction of choice for one million corporations, including half of the publicly traded corporations in the US and almost two-thirds of the Fortune 500. By recognizing that the creation of sustainable economic system requires a new type of corporation whose objectives are to optimize profit and public good, Delaware has provided a new vehicle for corporate responsibility and invites every country to create similar corporate forms.
The global economic system would be far healthier, more sustainable and more conscious if all corporations could voluntarily elect to become benefit corporations. Happily, in the world of corporate law, as with Delaware goes the world. Let’s applaud Delaware for continuing is long standing leadership in the development of corporate law worldwide.