Patagonia became the first company in California to elect benefit corporation status, an increasingly population form on incorporation with socially conscious businesses. Patagonia Founder Yvon Chouinard led a dozen businesseson Tuesday, which marked the first day companies could register as “B Corps” in four of seven states that have approved such laws.


“Patagonia is trying to build a company that could last 100 years,” said Chouinard. “Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs.”


In most states, the law requires corporations to prioritize the financial interests of shareholders over the interests of workers, communities, and the environment. Benefit corporations, by contrast, are legally required to:

 


  • have a corporate purpose to create a material positive impact on society and the environment;

  • redefine fiduciary duty to require consideration of the interests of workers, community and the environment; and

  • publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard.


New York, New Jersey, Virginia, and Hawaii passed similar legislation in 2011, joining Vermont and Maryland who did so in spring 2010. Benefit corporation legislation has also been introduced in Michigan, Pennsylvania, North Carolina, and the District of Columbia. Legislation has enjoyed strong bi-partisan support in every state.


In California, the legislation was supported by more than 200 individual businesses, 12 business associations, including the Silicon Valley Leadership Group and the U.S. Green Building Council, standards organizations like GreenSeal, and more than 3,000 California citizens through the advocacy efforts of Care2.com. Other sponsors included the American Sustainable Business Council, New Voice of Business, and B Lab. Lobbying was led by a legal working group co-chaired by John Montgomery from Montgomery & Hansen LLP, Donald Simon from Wendel Rosen Black & Dean LLP, and Jonathan Storper from Hanson Bridgett LLP; and the citizen advocacy campaign was led by Care2.com.