Change Creator sat down with Rick Alexander, the Head of Legal Policy at B Lab who is also an expert in Corporate Governance and Benefit Corporations; Author and Speaker on Governance Topics.
B Lab is a non profit organization dedicated to helping corporations and business owners shift their focus from profits to the impact that they have on their community as well as the planet.
This interview led us through the process of becoming a more socially-conscious business owner and being the change needed to redefine the way that the world conducts business.
For those of you who are interested in learning more about what it takes to make this change, here are the top 10 key takeaways and lessons that we received while speaking with Rick.
1) The Issue for Aspiring Social Entrepreneurs Lies in the Current Business Infrastructure
“We think that the current infrastructure much more encourages companies to put profit above purpose,” Rick told us early on in the interview.
The issue with the current business structure is that there is a heavy emphasis on the financial bottom line for business owners. The legal systems that are currently in place for businesses prioritize profit over societal impacts and also make it difficult for already established corporations to turn their attention over to these areas of focus.
Therefore, in order to change the way that we do business and to make it easier for corporations to focus on social good, we need to change the systems that we have in place.
2) Change Begins With the Legal System and Our Bottom Lines
At the moment, business is almost entirely focused on earning and infinite growth.
Our legal system encourages owners of corporations to set their sights on making more money while not putting equal importance on the ability of a company to make an impact on the world around them.
While capital is certainly an important part of running a business, purpose and impact should be a main focus as well.
How do we change the system so that we focus on all of these aspects? To make this change, we need to implement tools that make it so that the legal systems recognize the importance of focusing on profit, economic impact, and social impact.
3) What a Benefit Corporation Is
Simply put, a benefit corporation is a type of corporate entity that deviates from the normal profit-driven model and instead seeks to benefit all of those working within the company as well as the outside world.
In addition, benefit corporations are also focused on being more transparent and accountable when it comes to their business operations.
4) A Benefit Corporation Is Still a C Corp (With Some Minor Differences)
A C Corp is a term that refers to a tax status given by the U.S. government to corporate entities that are taxed separately from their owners. Although it may seem as though a benefit corporation would differ from this structure, a benefit corporation is still a C Corp. The only difference between the two is that a benefit corporation explicitly states their intent to focus on profit as well as their impact within and outside of their company.
5) It All Starts With a Provision
There are no special types of qualifications that a potential corporation needs to meet in order to become a benefit corporation. A corporation that wants to become a benefit corporation need not change anything about the traditional structure. All a socially conscious business owner needs to do in order to form a benefit corporation is to add a provision that states its intention to be a socially responsible benefit corporation. They are still technically a traditional corporation, however.
6) Not All Lawyers Are Knowledgeable Or Aware About Benefit Corporations
The term “benefit corporation” is a rather new term and is not known amongst all law practitioners. This can make it difficult for entrepreneurs who want to form a benefit corporation if they decide to seek help from a lawyer who is not well-versed in social entrepreneurship. “I think it’s important for these younger entrepreneurs to make sure they’re talking to the right people,” our founder Adam Force advises, “just because someone has a big resume doesn’t mean their knowledgeable in these new, upcoming approaches.”
Rick builds upon this piece advice by telling us that some law firms are skeptical about benefit corporations and will actually advise against forming these structures rather than helping them do it.
7) The Differences Between Running a Socially-Conscious LLC and a Benefit Corporation
For beginning entrepreneurs and for those who are running a small business, an LLC is the way to go according to Rick. LLC’s are much simpler to run and have less tax implications than a corporation.
Once an entrepreneur begins raising capital and expanding, their attention should turn their attention to building a corporation. However, both can be successfully run with a socially conscious structure.
B Lab gives both LLC’s and corporation’s the advice and language necessary to turn their business from one based on profit into one based on both profit and impact.
8) Altering Business Operations Means Altering Our Way of Thinking
If you approach anyone in business and begin talking to them about a business structure that may not make as much money but will make more impact, it is extremely likely that they will not take you seriously. In business, money is often the meter of success, not impact. In order to change the way that people conduct business, we need to alter first the way of thinking.
This is exactly what Rick seeks to achieve through his work at B Lab. Only through a better understanding of how impact can make a difference in business will people be able to choose change over profits.
9) The Impact Assessment Tool
The B Impact Assessment Tool is a tool that entrepreneurs can use to understand what it takes to be a socially responsible company. The tool takes entrepreneurs through an assessment that will determine their current social and environmental impact, gives them a comparison with thousands of other companies to see which areas they are struggling in and which they are excelling in, and helps them determine what they can do to improve their impact.
10) Rick’s Book, Benefit Corporation Law and Governance: Pursuing Profit With Purpose
Rick’s new book, Benefit Corporation Law and Governance: Pursuing Profit With Purpose, serves as a reminder to readers that it is important for business owners to focus on impact in order to improve the world around us and helps walk them through the process of using benefit corporations as a tool for social good. You can learn more about his book here.
Are you interested in forming your own benefit corporation? Are you an LLC owner who is trying to have a bigger impact on the world around you? If so, you can hear the full interview with Rick Alexander here and you can learn more about B Lab and their mission on their website.
Listen to our full interview with Rick Alexander
You might also want to check out…
