Michigan Legislature considering B Corp law

January 3, 2012
| By Pete Daly |
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Benefit corporation legal status, which has been enacted in six states, is now being considered by the Michigan Legislature. If it becomes law, it’s a safe bet that Fred Keller’s company, Cascade Engineering in Kentwood, will be the first to become registered under that incorporation classification.

Cascade was the first Michigan company to be certified as a benefit corporation — B Corp., for short. That happened in October 2010, with certification made by B Lab, a Pennsylvania-based nonprofit organization dedicated to using the power of business to help solve social and environmental problems. At the time, Cascade was the largest certified B Corp., but the injection molding manufacturer may now have been surpassed by Patagonia, the apparel and footwear company in California, which was certified in December.

Worldwide, there are hundreds of certified B Corps and there are several dozen in the U.S.

A key reason for U.S. corporate structure laws is to protect investors, in the event that management doesn’t do what it promises to do in order to be profitable. The proposed benefit corporation registration status, however, recognizes that a company may be organized for more than the sole purpose of making a profit for its investors.

For years now, Cascade has released its annual Triple Bottom Line report. Most companies are focused on one bottom line: economic results. At Cascade, the bottom line also includes environmental and social issues. Employees, the environment and the local community are just as important as the return to investors.

Cascade was founded by Keller in 1973 with a half-dozen employees. Today, it is a $250 million company employing approximately 1,000 — about half of them in Michigan — manufacturing and marketing multiple brands in an array of industries including automotive, commercial truck and bus; containers for solid waste and recycling; furniture; material handling; and renewable energy. A key element in the business is its long-established expertise in large-part injection molding. Besides its own brands, Cascade supplies OEMs and also provides consulting services.

One of the most vivid examples of its focus on the Triple Bottom Line is the distinctive pink curbside trash bins produced by Cascade; the sale of each one generates funding for breast cancer research.

Cascade joined with other businesses in forming an organization to produce and deliver more effective large water filters — out of lightweight plastic, instead of concrete — for distribution in under-developed areas of the world where safe drinking water is not readily available.

Inc. Magazine reported on what it called “social entrepreneurs” in 2011, with one article dedicated to Fred Keller’s story. Under the heading of “The Case for More (Not Less) Regulation,” the article made the point that Keller has embraced, rather than resisted, regulation.

“I wasn’t proud of the title,” Keller told the Business Journal, with a laugh. “That was their doing; not mine.”

Being certified as a B Corp., in fact, is a form of regulation — albeit voluntary. According to Inc., Cascade is paying about $25,000 annually to maintain that certification, which requires third-party auditors and assessors to confirm that Cascade is, in fact, functioning as a benefit to all, not just to its investors.

“I think of myself as pretty fiscally conservative,” said Keller. “Maybe on social issues, I’m open-minded, but the whole nature of this is all about how do we as a society get to this next level of good for all?

“I certainly believe that it’s one of the things we’re seeing right now, with our disparities in incomes, that we are not necessarily on a track that’s going to be self-correcting.”

However, he said, he believes “we have to be circumspect” about regulation.

“We have to think about what kind of regulation we put in place, because every day, they’re writing new rules in the government — and those new rules have impacts on how we go about our business.”

New rules that are “more confining for business, in my opinion, (are) a negative. And we need to be more open, we need to allow a business to do more things. So on that score, I think I line up pretty much with what people could call conservative. We want to be able to have business allowed to do those things which they choose to do.”

That’s where the benefit corporation comes in. As a legal structure, it is designed to protect the founders and management of a business by making very clear to any would-be investors, up front, that the profitability of that company is not its sole objective.

“I think we need an ethic in the country which says we really ought to give our business an opportunity — and business ought to take the opportunity — to make the improvements that we all know can happen. And it doesn’t need to cost us extra money, and as a matter of fact, it can improve our culture and our business and cause us to be a more attractive business, as a result.”

Does Keller ever encounter criticism of his world view from other corporate owners and executives?

“No, I don’t,” he said. “People are largely impressed with what we are doing, but I don’t hear criticisms, per se. Maybe everyone’s just being West Michigan nice or something,” he joked. “I don’t detect any negativity about it at all.”

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