New type of firm aims for greater societal benefit

Legislation creating the conditions for benefit corporations, a new class of business required to benefit society as well as shareholders, has been passed in the US state of Maryland.

In the first legislation of its kind in the US, benefit corporations must create a ‘material positive impact’ on society, as well as consider how decisions affect employees, the community and the environment. They must also report on their non-financial performance against third-party standards.

Shareholders will have additional rights to hold directors accountable for performance on such issues. The companies are also empowered to take CSR considerations into account when making decisions, rather than simply having a legal obligation to shareholders.

Andrew Kassoy, a co-founder of B Lab, the charity that helped draft the legislation, said the new format would ‘protect companies from the pressures of short-termism while creating benefit for shareholders and society’.

Other US states, including New York, Pennsylvania and Washington, are considering similar legislation.