Socially Conscious Corporations Get a Place of Their Own in Maryland

For some people, the thought of a corporation working to help benefit society might seem like an oxymoron. Businesses, large companies in particular, are sometimes considered soulless slaves striving to maximize profits for the benefit of their investors alone. Maryland's new Benefit Corporation Law, which went into effect on Oct. 1, aims to change that.

The law, the first of its kind in the nation, creates an additional option for entrepreneurs who previously had only two choices when incorporating their business -- for-profit or non-profit. Sponsored by State Sen. Jamie Raskin (D-Montgomery), the law creates a new class of corporation, one that is concerned as much about benefiting society as it is about the bottom line. It also opens an avenue of funding for social entrepreneurs to seek investment capital.

"Businesses will be for-profit but have a public purpose cemented in at the launch of the company," explains Raskin. "This struck me as a very attractive evolution of the corporate form. Right now a normal corporation must act exclusively to advance shareholder value and enrich the company."

The additional choice ensures that companies will no longer be faced with sacrificing their socially-beneficial goals when confronted with an acquisition offer that, under traditional corporation laws, it couldn't refuse without risking a shareholder lawsuit.

"There have been a number of socially-conscious companies that have been forced to sell out to large corporations and end up sacrificing the public side of the equation," says Raskin. "Ben & Jerry's is an excellent example. The directors of the corporation were required to accept a handsome buyout offer even though they knew the business would lose its soul."

Benefit corporations can pursue any goal that will have a "general public benefit." In other words, it has to be something that will have a measurable positive impact on society and the environment, like going totally "green," offering literacy or work training programs, or hosting activities that will promote the arts and sciences. Companies incorporated under the law will have to submit an annual report detailing not only their financials, but also their good works.

According to Ida Cheinman, a board member of the Chesapeake Sustainable Business Alliance (CSBA), the law will create a network of locally-owned triple bottom line (TBL) businesses, companies equally concerned about their social, environmental, and economic performance.

"The time is right for this. There are a lot of businesses who have, perhaps unofficially, been operating based on the triple bottom line. Especially in this economy, everyone is looking for a way to differentiate themselves," Cheinman says.

"From a pure marketing standpoint," she continues, "consumers, customers, clients want to do business with companies they like and feel good about their choices. Sustainability is such a hot topic and larger corporations are greening their supply chain, becoming more environmentally responsible with reporting guidelines they have to live by, they will expect their vendors and service providers to be sustainable companies. Being formally incorporated as a benefit corporation is really a quick, legitimate way of saying 'I am exactly what you're looking for.'"

Investors will also take note, says Cheinman. "More and more investors are increasingly looking at the triple bottom line, whether a company is financially viable but is it also environmentally and socially responsible."

B-Lab, the group widely credited with driving the benefit corporation movement and getting legislation on the agenda in multiple states across the country, approached CSBA about holding information sessions, one of several groups holding similar meetings around Maryland about the new law. Response, says Cheinman, has been greater than expected, with meetings packed with entrepreneurs interested in the new law.

Sean Smeeton, president of Taharka Brothers, a locally-owned ice cream company with a social mission, had already made the decision to transition from a non-profit to a for-profit company. The benefit corporation law was a perfect match that "allowed the company to make a statement."

The company, named after a local basketball team, works to help young men from Baltimore's underserved communities gain work experience, leadership skills, and the opportunity to become stockholders in Taharka Brothers, and dispel the negative image of young men that is so pervasive in Baltimore.
"I believe strongly in the power of business to help solve social problems. As a non-profit it's hard to get people to help you do things. But now that social entrepreneurship has become much more popular, this will help start a movement to help change things," Smeeton says.

Looking forward, Raskin says he hopes that the Maryland law will not only make the state a lodestone for social entrepreneurs but that it will also lead to a sea change in the way that corporations view their contributions to social welfare.

"Larger corporations will probably be the last to come around, but looking forward 20 to 30 years I hope we will have a dominate corporate model that obligates businesses to look out not just for profits but for people and the benefits of the community," he says.

Walaika Haskins is editor-at-large of Bmore Media. She has lived and worked in Baltimore City for 25 years, taking occasional breaks to live in Paris, New Orleans and New York City, but she always comes back to Baltimore.

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Photos by Arianne Teeple

- Michael Prokop and Maurice Barrow with Taharka Bros. ice cream

- Taharka Bros. ice cream

- Maurice Barrow helps customers at Taharka Bros. ice cream

- Sean Smeeton, owner of Taharka Bros. ice cream

- Employees Maurice Barrow, David Harrell, and Michael Prokop at Taharka Bros. ice cream

- Michael Prokop and Maurice Barrow with Taharka Bros. ice cream