Rumor has it there could be a line out the door of Wisconsin Department of Financial Institutions’ offices next Monday morning, according to business attorneys in town.
That’s because organizations will be jockeying to be the first to register with the state as a “benefit corporation” — a new kind of business entity that has a mission for public good baked into its structure.
“It’s going to be exciting,” said Mark Starik, a sustainability researcher who plans to register his consulting company Always Be Sustaining as a benefit corporation on Monday, Feb. 26. “There’ll be apparently a bunch of us down at WDFI.”
Gov. Scott Walker signed Act 77 into law last November, making Wisconsin the 34th state to allow benefit corporations. The defining characteristic of the new species of business is an explicit mission to make a “material positive impact on society and the environment,” as the new law puts it.
Benefit corporations are structured differently from traditional Wisconsin corporations, in that they emphasize that public mission. For example, the company’s board of directors has a duty to make decisions that benefit not just those who own shares in the company, but “stakeholders” as well — customers, employees, the community they’re in, and the environment.
A benefit corporation is also required to release a report on its public mission at the end of every fiscal year to shareholders.
Business attorney Danielle Johnson with the law firm Neider & Boucher has been spreading word of the new law to her clients. She thinks benefit corporations could normalize the idea that businesses can be a force for good.
“I think it spreads a positive message that ‘Hey, it’s OK to make money and make a positive impact on the community at the same time,’” said Johnson.
Personal stylists Krystle Marks and Abby Felix Winzenried will be among those lining up to register a benefit corporation on Monday. The two are launching a clothing line called RAAH that aims to both celebrate and accommodate women’s bodies.
“I just felt like there was a huge gap in the clothing market,” said Marks, the company’s founder. “We tend to focus on one ideal size. We look at one shape, and we create all sizes out of that one shape. There are so many variations in women’s bodies.”
Marks and Winzenried also plan to hire “artisan groups” of women in other countries who are at risk of sex trafficking, or who have been trafficked, to manufacture the clothes.
“I had a heart for women trapped in trafficking,” said Marks. “We want to give women opportunities.”
Winzenried said that when it comes to the specifics of their mission, the two are committed to things like good pay and time off for the women they hire, as well as donating some portion of their revenues to groups working on women’s issues. She said that a lot of their mission will also be shaped by the workers themselves.
“I don’t want to go in there and say, ‘I’m solving your problem.’ I want to hear how we could best help them,” she said.
Marks said that she considered filing RAAH as a nonprofit, but after doing research, determined that chartering as a for-profit business was the right move.
“It takes money to do good. The more we can make profit in this company, the more we can give back,” she said.
She also thought it would be more meaningful for the women she’d be employing to be part of a for-profit company: “You’re trying to restore dignity to their life. You want them to feel like they’re not getting a handout from a nonprofit.”
While benefit corporations have only been formally recognized in the United States since 2010, for-profit businesses touting a social mission are nothing new. Starik described benefit corporations as part of a “business as a force for good movement.” The creation of so-called “B Corps” in 2004 — businesses that have been given a seal of approval from the Philadelphia-based B Lab nonprofit, which assesses corporations on their social impact — has also shaped that movement, he said.
But the notion of “businesses as a force for good” is also one that can elicit skepticism. For example, the term “greenwashing” was coined in the 1980s to describe companies that promoted their products as environmentally friendly primarily as a marketing ploy.
Israel Lopez, another business attorney at Neider & Boucher, acknowledged that the relationship between making money and doing good is a complicated one. He said he personally has encountered skepticism when trying to make revenue through his nonprofit, Chins Up, which fosters mentorship between college athletes and children.
“A lot of people had this look of, ‘You’re just trying to make money now,’” said Lopez. “But you can’t do anything without money.”
Starik said that while it’s good to scrutinize the motivations of corporations that espouse a public mission, he also said that it's important to consider the other side of the coin: There are many businesses that actually do good, he said, but don’t promote it.
“Organizations that do a lot of great things don’t tell people about it,” he said. “And that’s a detriment.”
Starik noted that on the whole, there is a dearth of research on whether benefit corporations are effective vehicles for doing good: “It’s the big question. We don’t know yet.”