State Bar Pushing Public Benefit Corporations in Georgia
Under present Georgia law, the answer is no, but that is going to change if new legislation drafted by the State Bar of Georgia gains traction during the upcoming Legislative Session.
These companies are part of a growing class of businesses incorporating in other U.S. states as Public Benefit Corporations, also known as PBCs or B Corporations.
PBC’s have only been around for five years, with the first legislation passing in Maryland in 2010.
According to an organization called B Lab, 31 states to date have enacted public benefit corporation laws; Georgia is not one of them.
“Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs,” Yvon Chouinard, founder of Patagonia, said in a press release announcing their certification as a B Corporation.
More simply put, PBCs will have legal structures in place that prioritize certain public benefits–like environmental protections or worker’s rights–regardless of who is running the company.
Additionally, PBCs have a protected legal basis for foregoing profits for the sake of providing or maximizing a public benefit.
Corporate “governance law still largely requires corporations to behave in a way that is procedurally designed to maximize shareholder wealth, or at least has led corporations to behave in such a way that shareholder wealth maximization has become widely regarded as a norm,” Kyle Westaway and Dirk Sampselle, two attorneys, in an article for the Emory Law Journal.
Incorporating as a PBC is different from traditional corporate social responsibility models, because companies must report on the public benefit metrics they adopt and shareholders can hold the business accountable for not meeting these metrics.
The State Bar of Georgia created an Ad Hoc Benefit Corporation Committee to study the issue back in 2013.
The committee released a small report, making recommendations for how this business model could be put into law.
In 2015, the committee, headed by Georgia State University Law Professor Cass Brewer, reconvened to create model legislation for Georgia.
“Our committee’s goal was to create an entity that was as flexible as possible and leave it to the owner of the entity, and then ultimately the customers, to decide how that entity should report and behave,” Brewer told Atlanta Progressive News.
After the drafted legislation passes through an internal approval process, the State Bar of Georgia will find legislators to work with as sponsors of the legislation.
There are currently two models that are most commonly used in state law – the “B Lab” model and the Delaware model.
The “B Lab” model is based off the work of an eponymous non-profit that drafted the first model legislation, and also creates standards and provides certification.
They list nearly 1,500 companies certified globally, including well-known brands like cheesemaker Cabot, cleaning products manufacturer Method, and outdoor clothing wear company Patagonia.
“On the other hand, there is another model that’s kind of looked to as an alternative for states to follow, which is the Delaware model,” Marshall Kent, a partner at the Smith Moore Leatherwood LLP law firm, told APN.
The firm tracks trends with PBC legislation nationally, and provides counsel on incorporating as a PBC to businesses.
The Delaware model–consistent with the state’s general pro-business approach–has much less rigorous standards, and relies on self-identification and self-regulation, without requiring any third party certification to incorporate as a PBC.
The State Bar of Georgia’s benefit corporation legislation “was patterned in large measure after the [American Bar Association] Business Law Section model benefit corporation legislation that was produced in a report right around the same time that our report was published in 2013,” Brewer said.
The ABA legislation attempts to address concerns over governance that the “B-Lab” model creates, and is more like the Delaware model in giving businesses a lot of autonomy over metrics and reporting.
In the meantime, Georgia is part of a shrinking list of states that do not allow businesses to choose to operate as Public Benefit Corporations.
“Kickstarter is excited to join a growing list of forward-thinking organizations — like Patagonia and This American Life — that have taken the big step to become a Benefit Corporation,” Kickstarter co-founders Yancey Strickler, Perry Chen, and Charles Adler, stated in a blogpost announcing their re-incorporation as a PBC earlier this year.
“While only about .01% of all American businesses have done this, we believe that can and will change in the coming years. More and more voices are rejecting business as usual, and the pursuit of profit above all,” they wrote.
Atlanta Progressive News would be interested in exploring re-incorporation as a PBC were it available in the State of Georgia. APN, which began publication in 2005, has been a Georgia corporation since 2006.
Maybe we will get that chance. Brewer says he is “cautiously optimistic” about the chances of their model legislation succeeding this year.
“One never knows how this process is going to go, but I certainly hope… that folks here in Georgia have the opportunity to use a Georgia legal entity for these public benefit type endeavors.”