June 24, 2014
State Representative Gregory Haddad is proud to announce that legislation he introduced establishing "benefit corporations" in Connecticut has been signed into law by Governor Malloy.
Unlike other corporate entities, benefit corporations must consider the environment and make a material positive impact on society in addition to pursuing profits. The legislation which Haddad has championed for the past three years, allows a corporation formed under state law to include a "statement of social benefit" in its articles of incorporation and bylaws.
"The law allows corporate management and the Board of Directors to make decisions that balance their responsibilities to the community, their customers and the environment with the need to maximize profits and increase shareholder value," said Rep. Haddad. "Companies will 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."
"This is a significant, happy milestone and for all those who have supported our efforts we are very grateful. Now our work can turn toward creating a vibrant community of social entrepreneurs in the state, using the power of the free market, along with the hearts and minds of this creative new brand of entrepreneurs, to help solve some of our world's most pressing problem,!" said Kate Emery, reSET CEO.
The new law creates a new corporate designation called a Benefit Corporation -- a hybrid between the traditional for-profit business model and the nonprofit model that operates like traditional corporations but with the purpose of making a positive impact on society and the environment.
"Since starting work on this legislation three years ago we've seen the number of social entrepreneurs waiting to become benefit corporations grow substantially. Benefit corporation legislation removes so many financial and legal barriers that were preventing social enterprise from taking hold here in Connecticut. We are proud that Connecticut has passed this legislation, effective October 1st, which is the most comprehensive in the nation due to the inclusion of the legacy preservation. Our thanks and gratitude for Rep. Haddad's unwavering support and continuous efforts over the years to see this legislation brought to fruition cannot be measured," said James Woulfe, reSET Public Policy and Impact Investing Specialist.
"The benefit corporation legal structure makes it easier for me to generate social, as well as financial, value in Connecticut, and provides me, and any future investors in my business, with the necessary legal protections to ensure that the social value my business creates are secure well into the future. I'm excited that Connecticut has made the commitment to social enterprise so that I am able to keep and grow my business here," said Christopher Brechlin, Founder of Blueprint for a Dream, a Willimantic-based company.
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.
Twenty-six 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 earlier this year.