One of the fundamental problems with the current corporate structure is that for-profit corporations are legally required to maximize profits. With profit as the primary objective, anything that takes away from it (like higher wages or stronger environmental practices) leaves the corporation vulnerable to being sued by its shareholders. Henry Ford was famously sued in 1919 by his shareholders when he tried to end dividends to them in order to decrease the cost of his cars and increase the number of people he employed. Ford lost and the court ruled that a corporations’ responsibility was to its shareholders and not to the community or its workers.
As a result of this mandate, wages remain stagnant while corporate profits soar. The profit motive also prevents corporations from investing in sound environmental practices because it is a cost that does not necessarily lead to increased profit. Instead, the public assumes the risk and cost of environmental degradation while corporations increase their profit margins. The relentless drive for profit means that businesses can either make profit or they can be socially responsibly, but they cannot be both.
Yet, it isn’t the case that all businesses only care about profit, even if they are legally required to do so. In response to this limiting structure, B Lab started a movement to start a new type of corporation- the B Corps, which stands for the Benefit Corporations. B Corps provide legal protection for for-profit businesses to prioritize a higher purpose than profit, such as environmental sustainability and higher wages. To date, 11 states have passed laws allowing the creation of B Corps.
The way it works is that once a corporation meets certain standards of social and environmental performance, accountability, and transparency, they can be a certified B Corps. Ben and Jerry’s just became the 635th business to become certified. Other big corporations, like Patagonia, are also certified B Corps, but Ben and Jerry’s is the first wholly owned subsidiary to certify, proving that the company could remain true to its founding values even after being acquired by Unilever. B Corps also help socially minded consumers by protecting against green-washing, where corporations, like Wal-Mart, tout sustainable practices but don’t deliver on their promise.
In the fight for better wages and stronger environmental protections, B Corps offer a way for corporations and advocates to work together for a shared goal and provide examples of good behavior and business models that buck the profit above all dominance. B Corps prove we don’t have to choose between making profit and making a better world.