Will Etsy Walk its Talk?

Etsy, the online marketplace for unique goods, recently filed a registration statement with the SEC to go public. The company has a golden opportunity to become the world’s first publicly traded benefit corporation and enjoy first mover advantage as the immediate global standard-bearer of business as a force for good. Esty would not only become the world’s third publicly traded Certified B Corporation but would also become the first publicly traded Delaware public benefit corporation.

Etsy would immediately eclipse Google as the defacto standard in governance by legally committing under Delaware law “to operate in a responsible and sustainable manner”. Doing good trumps do no evil. This is an incredible opportunity for Etsy to fulfill its mission of re-imagining commerce.

There is a catch, however. Etsy agreed to convert into a Delaware public benefit corporation as a condition of its certification as a Certified B Corporation. Unfortunately, Etsy has not yet converted and its IPO prospectus indicates that it currently has no intention to convert. The Delaware public benefit corporation is a relatively new corporate form that requires a corporation to operate with a social and environmental conscience in addition to the usual profit oriented one.

Failing to convert would be a missed opportunity of epic proportions.

Etsy’s lawyers and investment bankers have probably advised it against becoming a Delaware public benefit corporation. This would be no surprise. Lawyers are risk-averse and generally scared of new laws such as the benefit corporation statutes, and investment bankers are afraid of anything novel that might decrease the offering price.

Such fears, however, are unfounded. The Delaware statute has built-in safe harbors for directors that were designed to encourage companies to go public using this form.  Etsy has excellent counsel and experienced public company directors who can ensure that the board balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the chosen public benefit as required by the Delaware law. Etsy already conducts its business in this triple bottom-line manner. The market would likely price Etsy at a premium despite being the first benefit corporation to go public as it did other hot companies such as Google and Facebook despite their unconventional dual stock structure.

Frankly, the greater business risk is that Etsy fails to seize this historic opportunity and damages its reputation as a values-driven company by reneging on its commitment to convert as part of its Certified B Corporation certification.

The process to become a public benefit corporation is simple and Etsy has the votes because it has a voting agreement in place that obligates major stockholders to vote their shares in favor of a conversion if approved by the board. It’s highly unlikely that any stockholder would elect dissenter’s rights in advance of a pending IPO. Etsy already plans to amend its charter in connection with the IPO transaction. This is Etsy’s chance to be true to its mission to re-imagine commerce and build the Etsy Economy.

The publicity and goodwill generated will be outrageous. Etsy would blaze the trail for other benefit corporations to follow by showing them that it is safe to go public in this new corporate form. Etsy’s IPO would be more than just another IPO and would certainly be one of the top global business stories of 2015. Finally, Etsy would give impact investors a real choice and create a new market by offering the first listed securities issued by a US corporation legally committed to doing good.

Etsy will never have another golden opportunity to become the global thought leader in responsible and sustainable business. Becoming a Delaware public benefit corporation is perfectly in line with the company’s mission and values. Etsy will leave money on the table in the IPO if it doesn’t convert.

Etsy’s board, executive team and counsel may simply not fully understand the magnitude and significance of this opportunity. It’s rare that an IPO can simultaneously make history, set the global governance standard, and re-imagine commerce and the corporation.

If you are inspired by Etsy’s accomplishments and its mission to “re-imagine commerce in ways that build a more fulfilling and lasting world”, please urge the company to make history by becoming the first publicly traded Delaware public benefit corporation. It’s not too late in the registration process for Etsy to walk its talk.

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