Benefit Corporations- What is “general public benefit” and “specific public benefit”?

3 Jul

Recently, I have been part of several discussions of Benefit Corporations revolving around what benefit corporation status protects and how exactly it does it.  In particular, one of the conversations used George Zimmer’s recent ouster as the basis of the discussion.  In order to provide some clarity, I will be posting a series of blog entries discussing the various requirements and provisions of the Illinois Benefit Corporation Act.  While many of these provisions are identical to Benefit Corporation Acts in other states, if you are researching Benefit Corporation Acts in other states please consult the statutes in your state (or intended state of incorporation) as there may be differences or, as is the case in most states, there is not actually a Benefit Corporation Act on the books yet.

The heart and soul of the Illinois Benefit Corporation Act (and other such statutes) are that Benefit Corporations must promote the ”general public benefit” and may promote one or more “specific public benefits.”  A ”general public benefit” is defined under the Illinois Benefit Corporation Act as “a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.”   The Illinois Benefit Corporation Act enumerates seven specific public benefits, including what amounts to a miscellaneous catch-all category:

1) providing low-income or underserved individuals or communities with beneficial products or services;

2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business;

3) preserving the environment;

4) improving human health;

5) promoting the arts, sciences or advancement of knowledge;

6) increasing the flow of capital to entities with a public benefit purpose; or

7) the accomplishment of any other particular benefit for society or the environment.  (Note: This category functions as a miscellaneous catch-all.)

So, could Men’s Warehouse have become a Benefit Corporation?  Assuming Men’s Warehouse is located in a state with a Benefit Corporation Act, or is willing to incorporate in a state which does have a Benefit Corporation Act, the answer is yes.  While it’s easy to think that only a hippy-dippy company could become a Benefit Corporation, virtually any company has the potential to work for the “general public benefit.”  If Men’s Warehouse is willing to take the steps needed to meet an independent third party standard, then it could become a Benefit Corporation.  These third party standards will evaluate the company’s operations over a variety of criteria, all of which boil down to: 1) Are you treating your employees well?  2)  Are you treating other people impacted by your business well (neighbors, customers, suppliers, etc.)? 3) Are you treating the environment well?

Could Men’s Warehouse strive to provide a specific public benefit?  Yes.  George Zimmer was a recovered alcoholic and believed in second chances; therefore, Men’s Warehouse did not require employment background checks.  The company could have adopted a specific public benefit of “Providing employment at a living wage for former alcoholics” or “Providing employment at a living wage for formerly incarcerated people.”  Either option should qualify under the miscellaneous specific public benefit category (number 7, above).

If you have questions about Benefit Corporations, contact us at 773-609-5320, [email protected], or through our web contact form.

Disclaimer: This article cannot, and does not, create any attorney/client or consultant/client relationship.

 

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