A New Type of Company: the Public Benefit Corporation
For most of my life, I’ve been involved in non-profits. I remember become aware, at a very young age, that luck was baked into my life. Being a white person raised in suburban America has privilege built into it; it’s a fact that’s hard to dispute. Although my civic action is far from perfect, I try put as much good into the world as I take out, through small, every day habits.
At the same time I like to make and spend money (my husband will confirm). I feel no shame about this. I want to make money and be a role model, contributing citizen. Are these two things at odds?
In 2017 I was writing the business plan for a technology start-up. The best part was that I had the opportunity to integrate my personal business philosophies and mission into the project. It was a luxury that I hadn’t been afforded in a more traditional corporate setting. It lit a fire inside me…
As part of my research, I started studying companies I admired from afar: companies that made money and were run by good people, doing good things. But I mean, really doing good things. Not the corporate fluff: “We match employee non-profit donations up to a [very low, tax deductible] cap” or “We have an annual volunteer day.”
For Millennials – those of us born between 1982 and 2004 – I’ll let you in on a real, actionable secret: we look for public benefits. In fact, 87% percent of us contribute to non-profits. We are scared about what’s happening in our society and environment. We’re looking for ways to make our investments, purchases, and employment give back to the world around us. We think about companies’ double bottom lines.
While I was researching companies who are led by good people and doing impactful, quantifiable things, I came across an article about Kickstarter that warmed my heart and made my brain do a happy dance.
In case you’re unfamiliar, Kickstarter is a crowdfunding platform that helps create companies like this…
Two years ago Kickstarter converted to a public benefit corporation (PBC), which is a for-profit company that is legally bound to its values. If a PBC prioritizes maximizing shareholder value over the public benefits laid out in its charter, shareholders sue. Being a PBC is a serious, legal commitment.
Here are some of the public benefits that Kickstarter promises to uphold:
“We help bring creative projects to life. We measure our success as a company by how well we achieve that mission, not by the size of our profits.”
It will not… sell user data to 3rd parties; impose confusing terms of services on consumers; lobby – unless the issues align with the company’s values; avoid taxes with complicated domiciling; nor take advantage of the environment’s limited resources.
We give 5% of profits to music and arts education.
Kickstarter CEO, Yancey Strickler
Here’s what happened:
1. More talented people want to work for them.
Simply re-incorporating as a PBC had this effect. Because they’re publicly and legally committed to working in specific ways – and because rising talent wants to work for an employer with these values – they now have a stronger candidate pool from which to choose.
2. Created 300,000 jobs, 8,800 companies, & $5.3b direct economic impact.
These impressive figures don’t need much elaboration…
3. Stuck to a CEO compensation ceiling.
While the average CEO earns 204x the median compensation of an employee, Yancey Strickler earned only 5.5x the median comp.
4. Tax transparency.
Kickstarter took advantage of two tax credits in 2016 and paid a combined effective tax rate of 25%. If you’ve ever worked for a large multi-national corporation with offshore domiciles, you understand what a big deal this is.
5. Five percent of after-tax profits were invested in six non-profits.
These six non-profits are dedicated to building a more creative and equitable world.
Kickstarter is just one example; you may be familiar with Method Soap and Arthur’s Flour, which are also PBCs. Companies like these make me hopeful about our workforces, enlightened about new ways to make money, and optimistic about society. PBCs are a vehicle to create tangible and quantifiable benefit for the world.
In civic-minded Nashville, I’ve had several conversations about this in the past week alone. Entrepreneurs and artists around me are wondering how to make money and a legacy, by weaving themselves into our surrounding society. This is just one tangible and impactful way.
If this business structure excites you as much as it does me, stay tuned: very soon, I’ll be breaking down the mechanics of PBCs so that we (myself included!) understand how to apply them to our own business models.