The directors of a benefit corporation, in considering the best interests of the corporation
"shall consider the effects of any action or inaction upon: (i) the shareholders of the benefit corporation, (ii) the employees and workforce of the benefit corporation, its subsidiaries and its suppliers, (iii) the interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation, (iv) community and societal factors, including those of each community in which offices or facilities of the benefit corporation, its subsidiaries and its suppliers are located, (v) the local and global environment, (vi) the short-term and long-term interests of the benefit corporation, including any benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation and (vii) the ability of the benefit corporation to accomplish its general benefit purpose and any specific public benefit purpose."
The Model Legislation also allows directors to consider “any other pertinent factors or the interests of any other group that [the directors] deem appropriate.” The stakeholder consideration mandate is an important distinguishing feature from the basic corporation statutes in “constituency” states; under constituency statutes, the consideration of non-shareholder interests is permissive, while under the Model Legislation it is mandatory.
It is important to note that shareholders are among the stakeholders whose interests the directors of a benefit corporation are required to consider; in fact they are listed first, and remain the only stakeholder entitled to bring a legal action against the corporation or its directors. Therefore, directors of benefit corporations may not simply disregard financial stakeholders in pursuing their stated purpose; rather they must consider the interests of shareholders as financial stakeholders with the enumerated other interests.
While a shareholder of a benefit corporation could still bring a traditional action for the failure of the directors to adequately consider shareholder financial interests, such a shareholder could also now bring a benefit enforcement proceeding for failure to consider other stakeholder interests, e.g., for failure of the directors to adequately consider the impact of a particular action on the workforce of the company. While this grants shareholders an expanded right of action, it is important to note that the consideration standard does not require a particular outcome of the directors’ decision-making, but rather that there is a decision-making process that considers all of the enumerated stakeholders.
If directors were found to have violated their duty to consider stakeholder interests, a judge might give directors a fixed period of time to do some or all of the following: 1) consider the issue(s) deemed to have not been adequately considered and 2) implement a policy to ensure adequate consideration is made in future decisions.
Guidance: Creating General Public Benefit
Guidance: Determining Specific Public Benefit Purpose(s)