New type of company would be organized around social agenda
by Douglas Tallman | Staff Writer
ANNAPOLIS — Maryland is poised to become the first state in the nation to recognize a new classification of corporation that puts social welfare issues on the same footing as profits.
"For these companies, it makes sense and it's consistent with the brand we're trying to establish in Maryland," said Del. Brian J. Feldman (D-Dist. 15) of Potomac on Saturday.
Feldman sponsored House legislation that would have the state recognize so-called B corporations — "B" for benefit — in which for-profit companies have environmental, public health or arts objectives integrated into their charters.
"The B corporation legislation builds into the DNA of the company public purposes along with private purposes," said Sen. Jamie B. Raskin, the Senate sponsor of the legislation.
The bill passed the House, 135-5, on Monday. The Senate version passed, 44-0.
Del. H. Wayne Norman, a lawyer who has set up charitable entities, was one of five Republicans to vote against the legislation.
"I don't see any necessity for the B corporation. I'm happy with my no vote, my red vote," said Norman (R-Dist. 35A) of Bel Air. "I just didn't see the need to change a long-standing law."
Companies could become B corporations after a two-thirds vote of their shareholders. The companies would have to report to a third party its efforts to live up to its social agenda, similar to how companies report financial data to Moody's Investors Service.
The legislation also gives a B corporation's directors some protection if shareholders sue because the company's public-service goals conflict with the stockholders' fiduciary interest.
But Feldman and Raskin say that more than the legal protections, the legislation offers corporations a chance to brand themselves as community-minded businesses.
The B corporation benefits from being able to tell people they have organized not only to raise shareholder value but also to advance the environment and enhance a particular community, said Raskin (D-Dist. 20) of Takoma Park.
"I think that Maryland can become the Delaware of B corporations," he said. "We could be the magnet for companies that want to organize in this way."
A Web site set up for the issue says 285 companies have organized themselves as B corporations by altering their own charters or bylaws, but Raskin said they are B corporations in name only.
"None of them are recognized that way as a matter of state statute," he said.