Maryland, Cradle of the New Neoliberal Cultural Capitalism

In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation. As of January 2013 California, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, South Carolina, Vermont, and Virginia, and Washington had all passed legislation allowing for the creation of benefit corporations. Legislation is also pending in Illinois that establishes a new type of entity called the “benefit LLC,” making available to limited liability companies the same opportunities afforded to Illinois corporations under the state’s Benefit Corporation Law. Passage of the bill would make Illinois the first state to offer a social enterprise the opportunity to be a benefit L3C.

Maryland’s legislation was signed into law on April 13, 2010 and became effective on October 1, 2010

from The Economist

HE likes to do things differently. Yvon Chouinard changed his favourite sport, mountaineering, by introducing reusable pitons (the metal spikes you bang into the rock face and attach a rope to). Climbers often used to leave pitons in the cliff, which is environmentally messy, another of Mr Chouinard's peeves.

In business, Mr Chouinard, the founder of Patagonia, an outdoor-clothing firm, says he believes that well-treated employees perform better. (He wrote a book called: “Let My People Go Surfing”.) Before it was fashionable, Mr Chouinard preached a philosophy of sustainability and long-term profitability that he calls “the slow company”.

On January 3rd Patagonia was anything but slow in becoming the first firm to take advantage of a new California law designed to give businesses greater freedom to pursue strategies which they believe benefit society as a whole rather than having to concentrate on maximising profits for the next financial quarter.

According to Mr Chouinard, the new “benefit corporation”—usually referred to as a B Corp—creates the legal framework for firms like his to remain true to their social goals. To qualify as a B Corp, a firm must have an explicit social or environmental mission, and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results. Other than that, it can go about business as usual.

The B Corp is a deliberate effort to change the nature of business by changing corporate law, led by B Lab, a non-profit outfit based in Pennsylvania. California is the sixth state to allow B Corps; the first was Maryland, in April 2010. Patagonia was followed immediately by another 11 Californian firms, including Give Something Back Office Supplies, Green Retirement Plans and DopeHut, a clothing retailer. Across America, there are now several hundred B Corps. Before Patagonia, the best-known was probably Seventh Generation, a maker of green detergents, paper towels and other household products.

California's B Corp legislation took effect alongside a new law creating the “flexible purpose company” (FlexC), which allows a firm to adopt a specific social or environmental goal, rather than the broader obligations of a B Corp. Another option in America is the low-profit limited-liability (LC3) company, which can raise money for socially beneficial purposes while making little or no profit.

The idea of a legal framework for firms that put profits second is not confined to America. Britain, for example, has since 2005 allowed people to form “community interest companies”. Similar laws are brewing in several European countries.

The impetus for all this comes from people like Mr Chouinard, who believe that existing laws governing corporations and charities are too restrictive. For-profit firms, they argue, often face pressure to abandon social goals in favour of increasing profits. Non-profit firms and charities are needlessly restricted in their ability to raise capital when they need to grow.

This prevents socially minded organisations from pursuing their goals as efficiently as possible. Existing laws for co-operatives and mutual companies are inadequate. Hence the need for B Corps and other novel structures, goes the argument. There is no tax advantage to being a B Corp, but there is to some of the new legal structures.

Whether these new legal forms will change business that much remains to be seen. Supporters of existing corporate law say it does not prevent firms, if they so wish, from setting social and environmental goals or rigorously reporting on their performance in delivering them—and that pursuing profit is often the best way to benefit society. Nor is it clear how much difference in practice will be made by the obligation of a B Corp to weigh interests other than profits. How does one measure such things? What counts for more: a clean lake or a happy neighbour?

Mr Chouinard argues that making a firm's social mission explicit in its legal structure makes it harder for a new boss or owner to abandon it. Perhaps so. B Corps will be tested in the market. Anyone who feels inspired by a B Corp's mission is free to invest in its shares, or work for it.

An "ownership" society is fundamentally different from a corporate worker/ employee/ "proletariate" based society. Owning and renting involve two completely different sets of ethical responsibilities, with completely different "investment horizons". And creating a world filled with new "immortal" fictional corporate entities with unlimited liability protections and potentially unlimited offshore-based resources to draw upon is never going to benefit and/or privilege the small business owner-operator and or family farmer start-up trying to survive in a federally/legally streamlined globalised market. There are no market inefficiencies that would allow them to compete. Everyman must inevitably becomes a corporate wage slave who couldn't make an independent decision for which he alone bore responsibility if his very life depended upon it. Risk takers and innovators need not apply. And if, by chance, you should succeed, you will be bought-out and-or crushed the moment your head pokes out above the surface waves of salaried mediocrity.

B Corporations are simply a cultural-capital based "advertising gimmick". Its' "product" will be to complete America's transition from an "ownership" society, to a wholly "rental" one, filled with servile employees (not independent owners) who serve at the "pleasure" of the political class who develop and dispense the perverse crony-capital tax incentives that privilege and lure the new B Corporations into the region. If we really want to BENEFIT society, create new jobs and independent citizens, we should get rid of the reduced tax-rate corporate business form 'almost' entirely, not create a new class of socially-responsible charitable organizations. Charity is no substitute for liberty or independence. And socially responsible corporations don't need the liability protections offered through the practice of legal incorporation.