B Corp bills lingering in committees
While eight teams from six colleges are locked into a competition to create a management plan for businesses that are interested in becoming a benefit corporation, two chambers of state lawmakers haven’t taken any action on legislation that would create such a corporate entity in Michigan.
State Rep. Wayne Schmidt, R-Traverse City, was the primary sponsor of the House’s B Corp. bills, HB 4615 and 4616, and both have been parked in the Judiciary Committee since being introduced last May, also.
Under Jansen’s legislation, a firm that wants to become a B Corp. has to explain how it would provide a benefit to the public. In other words, a company’s officials must go well beyond the standard bottom-line thinking and decide how the company can make a positive impact on society and the environment.
Examples include: providing low-income individuals or underserved communities with products or services that largely are unattainable; promoting economic opportunities beyond job creation in the normal course of business; preserving the environment; improving the health of individuals; promoting the arts or sciences; advancing knowledge; and increasing the flow of capital to entities that already offer public benefits, such as foundations.
But in Jansen’s bills, companies are free to define any benefits and are not restricted to the previous examples. However, all proposed benefits must be included in the articles of corporation.
“The purposes included in the articles would have to include creating general public benefit. The purposes also could include one of more specific public benefits indentified in the articles, but the identification of a specific benefit would not limit the obligation to create general public benefit,” wrote Suzanne Lowe, a legislative analyst, in the legislation’s analysis.
A business also would have to designate a benefit director and appoint a benefit officer.
A corporation’s shareholders would have to approve benefits, and a company could terminate its status as a B Corp. by removing the benefits from its articles. A business that attains B Corp. status but doesn’t follow through on its benefit plan would have to go through an enforcement proceeding. A proceeding could be conducted by the B Corp. itself, a shareholder or a corporate director, or any other individual specified in the bylaws of articles of the benefit corporation.
A B Corp. has to file an annual report and primarily explain how it pursued its public benefit, or why it was unable to do that. If the latter is the case, a detailed description as to why it failed must be given. The report has to also assess the company’s overall social and environmental performance over the past year.
A B Corp. also has to reveal the amount of compensation it paid to its benefit director and include the names of every shareholder who owns 5 percent or more of the company’s outstanding stock in its annual report.
“The benefit corporation would have to send a copy of the report to each shareholder, either within 120 days after the end of the corporation’s fiscal year or at the same time as the corporation delivered any other annual report to its shareholders,” wrote Lowe.
A benefit corporation also would have to post its most recent annual benefit report on the public portion of its Internet website and file it with the Michigan Department of Licensing and Regulatory Affairs.
“The posted and filed reports could omit the compensation paid to directors and financial or proprietary information,” added Lowe.