Maryland is first state to adopt a law creating for-benefit for-profit companies
For the world of not-only-for-profits, some big news. A turning point, really.
As I said week before last, Maryland was poised to become the first state to adopt legislation creating a new corporate form requiring companies to consider larger societal interests. And, it just happened. Governor Martin O’Malley signed a bill to create Benefit Corporations, which have to take into account how decisions affect employees, community and the environment, publicly report social and environmental performance using third-party standards, and create a material positive impact on society.
It had passed the Maryland Senate 44-0 and the Assembly 135-5. In a press release, Andrew Kassoy, co-founder of B Lab, the non-profit organization that certifies triple-bottom line companies and spearheaded the campaign (also co-wrote the model legislation), said: “Milton Friedman would have loved this. For the first time, we have a market-based solution supporting investors and entrepreneurs who want to make money and make a difference.”
As I’ve written before, the law is aimed at the problem facing social enterprise founders who want to expand but don’t want to lose control of their mission to investors. With this law, companies not only need to consider the interests of all stakeholders when making operating and liquidity decisions, but they have legal protection for doing this.
B Lab co-founder Jay Coen Gilbert is quoted as saying: “This represents the first systemic response to the underlying problems that created the financial crisis–protecting companies from the pressures of short-termism while creating benefit for shareholders and society over the long-haul.”
Vermont is going to sign a similar law within the next month.
Will be interesting to see whether this law triggers the founding of more social enterprises (especially in Maryland).