Today's WSJ discusses a new corporate form.  Yes, you read that right, a new corporate form!  A few states, beginning with my home state Maryland in October 2010, now allow firms to incorporate as benefit corporations.  As Glom readers know, I'm interested in how entity choice can be an expression of identity.  I was eager to learn more.

So what are benefit corporations?  Although they are for-profit entities, they have as a purpose creating a "general public benefit": '"a material, positive impact on society and the environment, as measured by a third-party standard, through activities that promotes a combination of specific public benefits."  "Specific public benefits" include, among other activities,  providing beneficial products or services, promoting economic opportunity beyond regular job-creation, preserving the environment, improving human health, and promoting the arts, sciences, or advancement of knowledge.  Each year the corporations send shareholders an annual benefit report describing the benefits they have accomplished.

Ordinary corporations become benefit corporations by amending their charters, and according to the WSJ "hundreds of existing businesses" plan to reincorporate as benefit corporations in the coming months--Patagonia already has, and Ben & Jerry's will soon. 

On one hand, it's hard to see the need for the benefit corporation.  The WSJ quotes William Clark, a partner at Drinker, Biddle & Reath LLP, observing that the form's structure "tells directors that it's their duty to consider other interests, rather than say they 'may' consider them."   Sure, this codifies a rejection of shareholder wealth maximization as a governing principle, but all corporate law scholars know that shareholder wealth maximization is squishy. Garden variety corporations can donate to charity or go "green" and plausibly claim that they are, ultimately, increasing shareholder wealth. So why do we need a benefit corporation?  Charles Elson doesn't think we do--he's quoted as saying "for an investor, this is a terrible idea." 

I'm not sure if we need benefit corporations either, but I see the appeal. Again, I think entity matters.  Choosing the benefit corporation form is a kind of credible commitment--it signals to shareholders more powerfully than any slogan can that maximizing wealth isn't the ultimate goal of this particular corporation.  I think, at first blush at least, that this idea sounds a whole lot better than the L3C.  Like Bill Callison, I'm skeptical of that form--largely because it presupposes non-profit minded investors living cheek by jowl with investors who are looking to make a market return. Not only does that seems like a recipe for owner vs. owner conflict--it also dilutes the "warm glow" for nonprofit participants to know that some of their fellows are just looking to make a buck.

In contrast, with the benefit corporation all shareholders are on the same page.  The public benefit corporation won't generate the same kind of warm glow that a nonprofit would, but it may generate enough to succeed.  We'll see...

 Update: J. Haskell Murray has a chart comparing the various state benefit corporation statutes.

Update 2: Bill Callison reminds me that he posted on benefit corps last year.  Sorry, Bill--I'm getting old!

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Two economists at the Kauffman Foundation, Robert Litan and Tim Kane, have started Growthology, a new blog on entrepreneurship and economic growth.  Gotta love the name.  The Kauffman Foundation announcement is here.

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On June 15, Bill Gates announced that he will transition away from his day-to-day activities with Microsoft to a full-time role with the Bill and Melinda Gates Foundation. Yesterday, Warren Buffett announced that he will donate much of his vast fortune to the Gates Foundation, with smaller amounts going to various Buffett foundations.

Prior to Buffet's gift, which will be made in installments, the Gates Foundation had assets of nearly $30 billion -- over double the amount in the next largest philanthropic foundation in the U.S. (Ford Foundation). Last year, the Gates Foundation gave $1.25 billion in grants -- much more than any other foundation -- and the Buffett gift eventually will more than double that amount. According to Buffet, "We agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society."

I started writing this post many hours ago, in the wee hours of the morning, but I got stuck right here. What are we to think of this? There is, of course, a substantial "wow" factor associated with these developments. Mostly, we are wowed that anyone has $30 billion to give away, but I am also wowed that Bill Gates would devote his full time and energy to his foundation. That is impressive.

But the big story here has to do with the role of philanthropic foundations in performing what might be considered "governmental" functions. Peter Dobkin Hall has written extensively about philanthropy in the U.S., and his essay "Philanthropy, The Welfare State, and the Transformation of American Public and Private Institutions, 1945-2000" offers some interesting thoughts that seem relevant here:

Constrained by deep-seated hostility to "big government," policymakers and legislators devised governmental mechanisms that enabled them to achieve these ends without creating European-style central state bureaucracies. While centralizing revenue gathering (through universalization of income taxation) and policymaking in the federal government, the actual tasks of implementing policies was allocated to states, localities, and private sector actors.

Among those policies, of course, is tax policy, which encourages the formation of foundations by people like Gates and Buffett. The NYT noted that the Gates Foundation distributed over twice as much last year as the United Nations Educational, Scientific and Cultural Organization (UNESCO). That's before the Buffett gift!

All of which makes me wonder: is this a rational way to organize the world?

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Rick Garnett and Nate Oman are talking about the pulls of capitalism and community. Rick writes:

Generally speaking, I believe that markets work, that efficiency matters, and that property- and entrepreneurship-rights are both practically and morally important. At the same time, I have a soft spot for anti-consumerism social critiques, agrarian nostalgia, "crunchy conservativism," the "family farm," and the "old neighborhood." ... Is there a way to combine the Burkean stance [with] exhuberant celebration of the many ways in which capitalism improves our lives?

Nate's angst-filled (but ultimately self-assured) response captures well how I feel about this:

The agrarian past, the family farm, and the old neighborhood largely survived and thrived because society lacked high levels of mobility and a host of rent-seeking institutions allowed some to profit at the expense of the economically stagnant. Finally, while I enjoy indulging in a bit of nostalgia and angst, I don't have it in me to "pull the trigger." When these sympathies get translated into concrete legal and policy proposals, I balk. Despite my occasional misgivings about freedom and markets, I can't help but believing at the end of the day that they hold out a better hope for the future – particularly the future of those at the bottom – than anything else, and too often nostalgia simply leads to vicious nonsense when it becomes law.

By the way, this discussion began with a thoughtful post by Steve Bainbridge, which he was drafting at the Uncorporations Conference.

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The New York Times is reporting on a conference entitled Wal-Mart: Template for 21st Century Capitalism?, which was held earlier this week at the University of California - Santa Barbara. The following quotations from conference participants probably tell you everything you need to know:

Susan Strasser, a history professor at the University of Delaware: "What do low-cost goods mean in light of the pressing issues of the global environment, global human rights and the global labor force? And how do we move beyond the single-minded self-interest of price?"

Edna Bonacich, a sociology professor at the University of California, Riverside: "Everything is based on the consumer first. Is this the way we want to live?"

James Hoopes, a historian at Babson College: "If anybody is proposing that they're going to solve what they see as the Wal-Mart problem by urging people not to think of themselves as consumers, they're barking up the wrong tree."

Game, set, and match to Professor Hoopes.

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This is a nice idea. I hope it catches on.

Here is a brief description of the idea:

Ready, Set, Relax! is a community initiative designed to raise awareness about the impact of over-scheduling on families and children. Days full of rushing from activity to activity along with unrealistically high standards of achievement for our children is taking its toll… and has parents all across America reconsidering their choices and their lifestyles.

Ready, Set, Relax! is one community's attempt to "slow down a bit" and to make conscious decisions about ways we can foster a balance between family time, unscheduled time, and outside enrichment activities.

By and large, we have managed to avoid the over-scheduled child by focusing on a few fundamentals: weekly Sabbath observance (Sundays), weekly family home evening (Monday's), and emphasis on education. Despite all of this structure -- no, I should say because of all of this structure -- our children have developed good friendships with peers and healthy relationships at home. It probably helps that none of our children is gifted athletically.

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