Effective January 2013 Pennsylvania corporations can elect to register as a Benefit Corporation.
This new state law gives entrepreneurs, investors, and consumers the option to build, finance, and patronize businesses that pledge, as part of their corporate structure, to operate in a socially and environmentally responsible manner, otherwise known as benefit corporations.
While not specifying criteria for or categories of benefits that are provided, this law permits a corporation’s directors to consider non-financial interests when making decisions, without breaching any fiduciary duty to shareholders.
For instance, directors of benefit corporations could consider using energy from renewable sources, such as wind or solar, even if the cost was higher than power generated by fossil fuels.
Benefit corporation directors could also take into account other firms’ environmental and social practices when choosing suppliers, and consider how the company’s business practices impact employees and the communities in which their facilities are located.
Being a benefit corporation is a voluntary action requiring approval of two-thirds of a corporation’s shareholders. The corporation’s performance in achieving its public benefit is assessed against a third party standard.
PA benefit corporations must file annual statements with their shareholders and the Department of State showing how they are meeting their commitment to provide public benefits.
Note that several other states have Benefit Corporation legislation enacted, including California, Hawaii, Illinois, Maryland, Massachusetts, Louisiana, New Jersey, New York, Vermont and Virginia. Legislation has also been introduced and is pending in various other states.