Wednesday, May 16, 2012

Colorado House Rejects Benefit Corporation Law

On Tuesday, May 15, 2012, the Colorado House allowed legislation to die in committee that would have given firms the opportunity to incorporate in Colorado as "benefit corporations."  Similar legislation passed overwhelmingly in the Colorado Senate earlier this month.  If the law had passed, Colorado would have been the ninth state to adopt benefit corporations. 

The Colorado Bar Association lobbied against the legislation, claiming that the social benefit purposes were defined too narrowly, and that the requirement for third-party certification (such as B-Corp) was too restrictive.

The eight benefit corporation states (in order of passage) are: Maryland, Vermont, New Jersey, Virginia, Hawaii, California, New York and Washington.  Several other states are considering this sort of legislation.  A complete list of the status of benefit corporation legislation in each state is on my website.  It is updated regularly.

Benefit Corporations are FOR-PROFIT firms that have an explicit social or environmental purpose stated in its founding documents. The idea is that its officers will be free to pursue these social purposes without fear of retribution or revolt from shareholders. Benefit corporations will still try to earn a profit for their shareholders, but will not be required to pursue profits exclusively. A comprehensive list of companies that are organized as benefit corporations is provided on my website, and is updated regularly. As of the writing of this article, there are a total of 94 firms that have elected to incorporate as benefit corporations. The two most well-known firms are Patagonia and King Arthur Flour.

Craig R. Everett, PhD
Graziadio School of Business and Management
Pepperdine University

1 comment:

  1. Hi Craig, thanks for posting information on the national efforts to expand Benefit Corporation status. You are one of the only sources keeping updated records of state-specific legislation and I appreciate it! I have a Colorado-based (and incorporated) startup that was to be (and will be, hopefully soon) a CO Benefit Corp, disappointed with our state House reps who killed the legislation after it passed the Senate. Definitely *not* inline with the progressive values I believe are a fundamental part of our Colorado business culture. Thanks again, Xander Page