In recent weeks I have attended seminars and business forums where the question of the social responsibilities of business owners was up for discussion. In each, the legal innovation called benefit corporation was brought up. If you are unfamiliar with the structure, here’s a good article that explains the details of this relatively new format, now available in the majority of states.
Some view this new vehicle as the preferred form of corporate organization for demonstrating social responsibility. To others this is just window dressing for marketing purposes. I am wary of the value of organizing as a benefit corporation for a small business that is likely to remain closely-held.
Endeavoring to do good for one’s community, country, or all of humanity should be a basic instinct of every moral person. However, as a small business owner, one’s primary responsibility is survival. An empty space on Main Street does nothing for the economic health of the community. Employing people does. Even if the business can feed only the owner for a time, that’s one less individual requiring state support and instead providing a modest but incremental contribution to civic vibrancy.
Organizing as a benefit corporation and tying one’s self to the mast of a ship that has been pointed into the wind in pursuit of sincere but challenging philosophical interpretations of social good, limits the corporate directors’ (usually the same people as a closely-held small business’ owners) flexibility to make difficult decisions that prioritize survival. Sacrifice for the sake of principle can be laudable but it can also be accomplished through conventional organizational structure. Benefit corporations are not opposed to profits. But their obligations can be conflicted.
Creation of profits is what breeds economic health for a society. The money earned gets invested or spent somewhere after all, and regardless of whether it keeps workers employed building yachts or selling coffee and donuts, the resulting vitality still circulates.
America is a land that produces more philanthropy than any other nation and it all originates with profits. It takes profit for companies to support the many good works of nonprofit institutions and it takes profit to ensure small business stability and survival. A productive for-profit small business owner is in a position to give back to the community, whether by cash contributions to noble causes, sponsoring the Little League team or hiring one more worker. For-profit can be an enterprise form just as socially responsible as one organized through a more confined structure. And for some business owners, quiet charitable action may be more in keeping with their own spiritual beliefs than public proclamations of intentions.