TO BE OR NOT TO BE: Oregon Benefit Companies. C. Edward Gerdes Vice President and General Counsel

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1 TO BE OR NOT TO BE: Oregon Benefit Companies C. Edward Gerdes Vice President and General Counsel

2 Purpose Of A Corporation 1. Extend Government Influence: Colonization 2. Maximize Profits for Shareholders Shareholder Supremacy Rule: Henry Ford s duty is to operate his business to create maximum profit for his shareholders rather than to benefit the community as a whole. Dodge vs. Ford Motor Company, Michigan Supreme Court, 1919

3 Proposition The Old Purposes of Doing Business No Longer Work!

4 B Lab and B Corps 501(c) non-profit created in Confers B Corporation certification 2. Promotes legislation 3. Creates assessment tools for businesses to measure benefits of their existence

5 Model Benefit Company Legislation 1st, Maryland states (plus D.C.) have Benefit Company law 20 th, Oregon 2013, 2 nd to include LLCs Top three states: Oregon (617), Nevada, California B Lab certified B Corps: 1,381 B Corps. in 41 Countries

6 Oregon Benefit Company HB 2296, ORS Legal status administered by the state Effective January 1, companies became first to register

7 Aim of Benefit Company 1. Establish a public purpose, taken as a whole (general purpose or specific purpose) 2. Establish a fiduciary duty of directors, officers, and managers to consider material positive impacts of decisions on multiple stakeholders 3. Create accountability by requiring annual report measuring company performance as against independent third-party standard

8 Fiduciary Duty Governors must act in the best interest of the benefit company (under ORS Ch 60 or 63), considering in addition how decisions will affect: 1. Interests of shareholders or members 2. Employees and workforce of company and of subsidiaries and suppliers 3. Subsidiaries and suppliers 4. Customers 5. Communities where located 6. Local and global environment 7. Short-term and long-term interests 8. Ability to fulfill general and any specific public purposes Unless required in articles, Governors need not give priority to a particular interest over other interests.

9 Benefit Company Attributes 1. Simple majority of owners can create/terminate: unless governing docs or ORS Ch 60 or 63 alter simple majority, or shares on national securities exchange 2. Insert statement in articles: S-corp corp, C-corp corp, LLC, PC 3. Identify Governors: Benefit Governor 4. Adopt Third-Party Standards 5. Publish Benefit Report annually 6. Shareholders may compel company to follow public or specific benefit Through injunctive relief 7. Governors, directors, managers, members are not personally liable

10 Café Yumm! Public Benefit Beau Delicious! International, LLC dba Café Yumm!: The Company is a benefit company subject to Sections 1 to 11 of the Public Benefits Company Law of Oregon Laws, Chapter 269 (H.B. 2296) in that the Company commits to creating a general public benefit. ORS ORS (2013)

11 General Public Benefit Defined... a material positive impact on society and the environment, taken as a whole, from the business and operations of the company.

12 Triple Bottom Line NON MAGNUM NISI BONUM No greatness without goodness

13 Specific Public Benefit Examples Promoting the arts, sciences, or advancement of knowledge Increasing the flow of capital to entities with a public benefit or purpose Preserving the environment Promoting economic opportunity for individuals or communities beyond creation of jobs in the ordinary course of business From Model Legislation

14 Structure to Measure Progress 1. Appoint Benefit Governor 2. Adopt Third Party Standards 3. Prepare Report by April 30 of Each Year to explain: *general public benefit *specific public benefit, if elected *assess per third party standards the success or conditions preventing success *provide to investors & make available to public

15 Third-Party Standard Assess the extent to which company provides a general or specific public benefit against a third-party standard : 1. Defined: A recognized standard for defining, reporting, or assessing social and environmental performance 2. Establish criteria of standard that apply to all benefits 3 rd party not controlled by company or affiliates Transparency of criteria and how weighed, process of development, disclosure of relationships that might compromise 3 rd party independence

16 Sample Third Party Standards B Lab bcorporations.net GRI globalreporting.org Sustainability Reporting Standards ISO iso.org Green America greenseal.org Green Plus gogreenplus.org Benefit Corp (list)

17 Personal Opinion Choice: B Corp. or Benefit Company Core Value: Factor in choosing whom to do business with Consumer: Must begin judging companies based on what benefit they provide to society Legislators: Must begin preventing companies from externalizing costs to communities

18 Resources Instructions for creating a Benefit Company Lawyers Jill Fetherstonehaugh, Business Law Center Frank Gibson, Hutchinson Cox Patrick Lynd, Herschner Hunter Jeff Wolfstone, Lane Powell

19 Benefit Company Leadership Summit October 16, 8:30am 3:30pm The Sentinel Hotel 614 SW 11 th Ave, Portland $55.00 networking event sponsored by B Lab

20 Cafeyumm.com/Bcompany