March 15, 2012
REP. HADDAD LOOKS TO ENCOURAGE “SOCIAL ENTERPRISE BUSINESSES”
Corporate mission includes more than bottom line
Commerce Committee Vice-chair Rep. Gregory Haddad (D-Mansfield, Chaplin) is sponsoring a bill
(HB 5466) to create a new corporate designation called a “social enterprise business.”
The legislation, which was the subject of a public hearing before the Commerce Committee today, allows a corporation formed under state law to include a “statement of social benefit” in its articles of incorporation and bylaws.
“This provides a company whose mission may include improving the environment or public health to make business decisions with those goals in mind - not simply on only how investors are affected,” Haddad said. “Companies can still make money and deliver a return to investors, but this provides executives with more flexibility in pursuing the true founding goals of a business.”
Haddad cited Ben & Jerry’s 2000 sell out to global food giant Unilever as an example of what could be avoided by the legislation.
“Ben & Jerry’s was well known as a socially conscious company, but concerns were raised that the Unilever decision compromised that aspect of the business,” he said. “There may have been concern within the company that stockholders would challenge a decision to not sell as it could have limited short-term profits to investors.”
Haddad also pointed to the popular growth of socially responsible mutual funds, noting that a number of them have outperformed the stock market. According to Consumer Reports, socially-oriented environmental funds Winslow Green Growth (WGGFX) and Portfolio 21 (PORTX) provided double digit returns over the past five years far exceeding the S&P 500 Index.
Many in the non-profit community have also endorsed the concept saying it can show that the principles of entrepreneurship can be used to help solve societal problems.
Seven states, including New York and New Jersey currently have benefit corporation laws. The outdoor apparel and gear company Patagonia was the first entity to register under California’s benefit corporation law which took effect January 3.