Kickstarter transcended the prevailing corporate law to protect its soul.

Kickstarter became a global leader in corporate governance and business as a force for good when it became a Delaware public benefit corporation this week.  By embedding its charter in Article III of its Certificate of Incorporation, Kickstarter put the full power of corporate law behind its ultimate purpose and social and environmental goals.  Under Delaware’s public benefit corporation law, Kickstarter, now Kickstarter PBC, has a clear mandate to operate in a responsible and sustainable manner, and its directors have express liability safe harbors for the company’s socially and environmentally responsible approach to business.

By opting out of business as usual, Kickstarter elevated its stated purpose of “bringing creative projects to life” to the same legal status as the only legitimate corporate purpose under prevailing corporate law – maximizing stockholder welfare. Until its conversion into a benefit corporation, Kickstarter’s pursuit of social good put it at odds with the prevailing corporate law and subjected its directors to potential liability unless they could show that the social and environmental goals of the kind set forth in its charter were direct means to the sole legitimate corporate purpose – maximizing stockholder welfare.

Kickstarter’s bold move augmented its well established socially responsible credentials.  The corporation is one of approximately 1,400 Certified B Corporations, businesses that have passed the B Lab Certified B Corporation social and environmental impact assessment.  To maintain their certification, B Lab requires Delaware Certified B Corporations such as Kickstarter to convert into Delaware public benefit corporations by August 1, 2017, the fourth anniversary of Delaware’s adoption of the law.

Kickstarter demonstrated its commitment to its principles by converting early.   Delaware law requires a 2/3 vote of all stockholders and the offer of so-called dissenters’ rights to stockholders of private corporations who vote against such a transaction, which rights require the corporation to purchase a dissenter’s shares at fair market value. The fact that not a single Kickstarter stockholder elected dissenters’ rights will give comfort to other corporations considering converting into benefit corporations: dissenters’ rights and the required super-majority vote are not likely to be real impediments to conversion.

Reflecting its dedication to creativity, Kickstarter’s comprehensive charter is a masterpiece.  A Delaware public benefit corporation must chose one or more public benefits and set them forth in its Certificate of Incorporation.  Kickstarter embedded at least five public benefits – artistic, charitable, cultural, educational and environmental – in its Certificate of Incorporation with great clarity and precision, leaving no doubt that its commitment to doing the right thing by stockholders, society and the environment is real and backed by the full power of law.

Kickstarter also creatively used the law to demonstrate its commitment to be a responsible global citizen.  Its Certificate of Incorporation, for example, provides that the corporation “will not use loopholes or other esoteric but legal tax management strategies to reduce its tax burden.”  The benefit corporation law allows Kickstarter to safely eschew common tax arbitrage strategies such as transferring intellectual property to an Irish subsidiary, as its Brooklyn neighbor Etsy did recently, or re-domiciling in Ireland to reduce its US and state corporate tax burden and thereby maximizing stockholder welfare. Such strategies are legal but harm the US, and its states and taxpayers, by eroding the tax base. As a benefit corporation, Kickstarter may chose a less profitable and more socially responsible tax strategy that preserves the priceless asset of its integrity.

The New York Times suggested that Kickstarter has chosen altruism over profit but the truth is that Kickstarter chose both.  Kickstarter, which has been profitable for three years, signals to corporate America that altruism and profitability are not mutually exclusive but actually go hand in hand.  As Professor Robert Eccles and his colleagues at Harvard Business School have shown in a recent white paper, corporations that adopt principles of sustainability, such as those embodied by benefit corporations or set forth in Kickstarter’s charter, tend to provide a significantly greater rate of return to investors than their conventional peers.

Wall Street and Silicon Valley have long recognized the inherent power of a corporation’s ultimate purpose in creating value by endorsing the common practice in tech companies such as Google, Facebook and LinkedIn of issuing the founders super-voting stock.  This strategy provides the founders with the political power to ensure the fulfillment of the corporation’s vision and purpose.  By embedding its purpose and values in its Certificate of Incorporation, Kickstarter ensures their continuity and reduces its key-man dependency on the founders.

Kickstater’s founders have stated that they are not interested in going public or being acquired but its new status as a Delaware public benefit corporation makes it one of the iconic socially responsible corporations. Kickstarter joins the ranks of other leading Certified B Corps that are also benefit corporations such as outdoor retailer Patagonia and ice cream maker Ben & Jerry’s Ice Cream.  Kickstarter is well positioned to go public, however, and may become the first publicly traded benefit corporation.

I hope that Kickstarter will recognize the opportunity to become the global leader in governance and business as a force for good by going public in an IPO that reflects its creativity and caters to investors who are aligned with its values. A Kickstarter IPO would begin to give impact investors a clear choice between investing in corporations that are legally committed to doing the right thing by stockholders, society and the environment and those that are committed by law to business as usual.

In the meantime, Kickstarter’s brilliant charter provides a shining example of how to design customized governance provisions in a Certificate of Incorporation that support a corporation’s heroic purpose and values with the full power of law.