In an opinion piece in today’s print edition of the Wall Street Journal titled “Companies Shouldn’t Be Accountable Only to Shareholders,” Sen. Elizabeth Warren announced that she will introduce legislation called the Accountable Capitalism Act to require all corporations with more than $1 billion in revenue to become federally chartered and adopt a new model of corporate governance based on the benefit corporation model already in use in 34 states.
While promoting “Accountable Capitalism” may not be surprising coming from a liberal icon like Sen. Warren, it may surprise some who haven’t been following the rise of the benefit corporation to know that Republicans, the world’s largest investors, and an increasing number of business leaders have been promoting a similar idea for years.
On the political front, across those 34 state legislatures—including Delaware, home to the majority of publicly traded companies and two-thirds of the Fortune 500—there have been 30 unanimous votes in support of benefit corporation legislation, and 88 percent of all legislators have voted in support. Benefit corporation laws have been signed by Republican Governors including former Indiana Governor and current Vice President Mike Pence; former South Carolina Governor and current U.S. Ambassador to the UN Nikki Haley; Gov. Scott Walker from Wisconsin; former Governors Sam Brownback from Kansas, Jan Brewer from Arizona, Chris Christie from New Jersey; and their peers in Florida, Idaho, Kentucky, Louisiana, Nebraska, Nevada, Tennessee, Texas, Utah and Virginia. Even libertarian conservative Sen. Rand Paul endorsed the benefit corporation model on a 2014 visit to Silicon Valley.
Benefit corporations are exactly the same as traditional corporations except for one important thing that is uniting strange bedfellows: Benefit corporations fix a source code error in the operating system of capitalism—a legal concept called “shareholder primacy.” Unlike traditional corporations, the boards of directors and officers of benefit corporations are required to consider the impact of their decisions not only on shareholders, but also on other stakeholders, like workers, customers, communities, suppliers and the environment. Research, business leaders and investors are increasingly on the same page that this kind of stakeholder governance is not only good for society—it is good business.
The directors of benefit corporations exercise their expanded fiduciary duty in service of achieving a higher purpose than simply maximizing shareholder value—their public benefit purpose is to create a material positive impact on society and the environment. To create greater accountability and transparency, benefit corporations are required to publicly report about their social and environmental performance so customers, workers, investors and policymakers can assess for themselves whether the company is living up to its promises. Not incidentally, this increased transparency builds trust, which in turn further builds value.