Key Concept ~ The ability of companies to incorporate as Benefit Corporations is spreading throughout the states. On the surface it sounds noble enough, but, like most legislative moves, it’s bound to have unforeseen consequences. The fact is, for benefit and for profit can coexist today, and be exercised as a significant advantage in the marketplace. But that requires shift in consciousness, not the introduction of a new legal entity status.
I’m finally catching up on a bit of reading coming off a very busy week. I read an article this morning by Angus Loton called “With New Law, Profits Take A Back Seat” on the Wall Street Journal’s Small Business site. It explored the accelerating emergence of states (up to seven now, with New York and California coming aboard in the coming months) enabling companies to incorporate as For Benefit Corporations. These will still be taxable organizations, as opposed to the current 501(c)(3) structure for nonprofits. The key difference in the new entity structure is to allow directors to consider social or environmental objectives ahead of profits. It does so by shielding the members of the board of directors from shareholder litigation.
Obviously the need for a new approach to business as usual is long overdue, but is this the answer? Whenever I encounter someone or something new, I always check in to how I feel about it as much as what I think about it. For me, this immediately didn’t feel quite right. The fact of the matter is, this reflects a perspective that being a good social citizen, caring for the environment, and being profitable are somehow at odds with one another, like throwing matter and anti-matter together to a destructive end. In my book, “The Transformational Entrepreneur ~ Engaging The Mind, Heart & Spirit For Breakthrough Business Success” I proposed a new approach to business that can accelerate profits while being of service to one’s associates, community, customers and the environment. This wasn’t an academic exercise. It is evidence-based, and the concepts and approach I propose have a strong correlation and justification from the emerging research from applied behavioral economics, emotional intelligence, the neurosciences, and performance psychology.
I cannot help but think that once again, we, as Westerners, are looking out there for a quick fix, when the keys to authentic change are much closer to home…they lie within. What’s required is a shift in consciousness, not a shift in legal entity status. Once again I fear we are treating the symptoms instead of the cause. And any time we legislate less accountability in corporate governance, by not allowing shareholders to bring suit against directors, I get nervous. I can’t help but feel that somewhere in lower Manhattan there’s a group of very clever characters already figuring out a way to manipulate this to their advantage. Having worked in the investor-driven startup community for more than a decade, I also envision very real challenges in securing equity financing for these types of companies. I’m sorry but, investors are investors…they get in to get out with capital gains in hand. It is a high-risk, high-reward game. While some mindful Angel Investors may support this, I’m hard-pressed to see how this will drive substantive change in our business culture.
Wouldn’t we be better served to take an entirely new approach to how we go about doing business? It is possible to do good and do well. Companies that embrace a more mindful perspective, within the standard legal entity statuses that already exist, will attract and retain the brightest, most creative talent. They will discover less hierarchical business structures capable of accelerating the flow of intellectual property into commercially viable products and services to emerge. Through mindful business practice, from a position of higher consciousness, we can out-compete the old world business paradigm. When enough companies do so, we’ll reach an inflection point and the vestiges of management from the Industrial Age will fade into the annals of history.
© 2012, Terry Murray.