“These are companies with a cause,” said Rep. Flood, a Democratic state representative from the 75th district since January, 2009.
B-Corps, now legal in 19 states, were inspired by a growing field of “impact-investors,” or socially-aware stockholders who seek a modest profit while making a measurable difference improving their communities.
Flood’s legislation, House Bill 66, would establish a new form of corporation in Kentucky: for-profit businesses with a corporate governance structure in which the creation of profit for shareholders is a primary though not exclusive goal. Historically, corporations have an obligation to maximize profit for investors. Flood’s legislation ensures protection for corporations which state a direct public benefit in their incorporation.
For example, as a recent article by NCSL’s State Legislatures magazine reported in April, 2013, Revolution Foods incorporated as a b-corps to provide fresh, affordable meals to school children in Oakland, Calif. The company recently expanded from serving 300 meals a day in only the Oakland area to over 200,000 meals a day in 25 cities across the country, employing 900 people at regional kitchens. B-corps mission-driven goals target environmental, educational and other public and charitable causes.
Though taxed like a traditional corporation and held to high standards of accountability and transparency, Kentucky’s b-corps would be better protected from potential shareholder lawsuits claiming a failure to solely maximize profits since b-corps balance profitability and social commitments in pursuing the bottom line.
“Socially-responsible start-ups often struggle to find adequate backing from mainstream financial institutions. The profit margin is smaller and takes longer to realize but the societal benefits are immense,” Flood said.
Flood is confident that allowing b-corps to form and operate in Kentucky will help shape Kentucky’s future for the better.