How Do I Consider Stakeholder Interests?

In a traditional corporation, all board decisions must be made with the ultimate goal of increasing returns to stockholders.  In contrast, the directors of a benefit corporation must also take into account the effect of their decisions on other stakeholders.  This change allows entrepreneurs to use for profit companies to pursue their mission, and allows investors to invest in such enterprises. Some have questioned whether a board can balance so many different interests.

We do not believe that directors will find themselves unable to make these decisions. As one author put it:

"We live by many principles, but we execute them through a narrow range of applications. Likewise, the corporation should have a simple set of objectives but a broad set of values by which it judges their applications."1

In fact, benefit corporation status is not likely to have a significant effect on the day-to-day operations of a corporation. Most corporations interact with a variety of stakeholders—customers, employees, suppliers, etc.—and that interaction requires that the interests of those stakeholders be considered, whether or not that consideration implicates the ultimate purpose of the corporation. Of course, some decisions that affect stakeholders will be treated differently in a benefit corporation, but those decisions will be generally be made by or pursuant to policies involving board level decisions. The board will need to have information about how significant stakeholders are materially affected by corporate policy. The board in most traditional corporations likely already receives some of this information. In some cases this may be because the corporation has a sustainability reporting function. In others, it may simply be in the nature of operating a business to understand its effect on stakeholders.The board of a benefit corporation may also want to assign primary responsibility for the public benefit aspect to a committee. To learn more about how a the board of a benefit corporation operates see the Guide to Board Room Decision Making.  

 

Guide to Board Room Decision Making

 

FAQs for Directors

 

The Public Benefit Corporation Guidebook

 

1 Colin Meyer, Firm Commitment (2013) 193.