May 09, 2012
Benefit Corporations: Marketing & Branding
Posted by Haskell Murray

In addition to redirecting the focus of directors to stakeholders other than just shareholders, marketing/branding has been discussed as a major benefit of organizing under the benefit corporation statutes. (See, e.g., Allen Bromberger, a leading attorney in the social enterprise space, who writes:  “Many observers believe that the advantages benefit corporation status deliver are brand-related.”)

Personally, I don’t think marketing/branding value is a substantial benefit of merely becoming a benefit corporation.  (I will leave for the comments the normative question of whether the states should be intentionally engaged in the entity branding business at all.)

The benefit corporation statutes do mandate some additional transparency through the required annual benefit report, but the statutes do little to ensure a valuable brand. If I were an investor looking for “blended value” – part monetary return, part “warm glow ” – the benefit corporation statutes alone would not convince me that I am going to get either.

For example, benefit corporations must be measured against a “third party standard,” but the statutes do not say much about the standard and how it should measure the "benefit." The model legislation states that the third party standard must be comprehensive, independent and credible (words lawyers could have fun defining).  But those requirements are not in a number of the actual statutes and even if they are included, investors would still have to do due diligence on the specifics of each third party standard, which ruins most of the benefits of a brand.  One third party standard could be environmentally heavy, one could tilt towards employees, one could be bent liberal, one could be bent conservative, etc.  You just aren't exactly sure what you will get in a benefit corporation.

The branding value on the sales end of things is similarly low. Right now, few customers know what benefit corporations are and as they become better informed they will realize that the benefit corporation statutes do not guarantee them that much.

The B Lab certification and other similar certifications may, however, have some significant branding value. (And there may be a halo effect for non-certified benefit corporations until the ignorance addressed here disappears). If certain investors trust B Lab and agree with its standards, then those investors can rely on the certified B corp. brand.  Also, as noted in an earlier post, I have heard, anecdotally, that being a part of the certified B corporation community and similar communities (like the L3C community) can be quite valuable to companies because of the networking opportunities, services, discounts and resources available to members of those communities.

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