A New Type of Company: the Public Benefit Corporation

For most of my life, I've been involved in non-profits in some way. I remember at a very young age, having an awareness 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 to ensure that my daily, small actions put as much good into the world as I take out.

However, 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 great, contributing global citizen. Are these two things opposed?

 

Last year, 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 an opportunity to apply creativity to business, which was a luxury I hadn't been afforded in a more traditional corporate setting. And boy, did I take advantage of this...

As part of my research, I was eager to learn more about companies I admired from afar: companies that <gasp> made money, but were run by good people and 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] cap" or "We have an annual volunteer day."

Get with the times, Mr. Corporation. While I agree that something is better than nothing, these "public benefits" are outdated.

 

For those of us born between 1982 and 2004 (think: you, your employees, your future employees, and your clients), I'll let you in on a real, actionable secret: public benefit is important to us.

Eight-seven percent of us (and by "us" I mean the dreaded generation: Millennials) contribute to non-profits. We are scared about what's happening in our society and environment, so we look for ways to link our investments, purchases, and employment to philanthropy. We use the money in our wallets to support companies' double bottom lines.

 

So 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.

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. You see now what I mean by "corporate fluff" volunteer days. Being a PBC is a serious commitment.

In case you're unfamiliar, Kickstarter is a crowdfunding platform that helps create companies like this...

GoldieBlox: one of my favorite companies in the world

 

Let's take a closer look Kickstarter as a PBC though. Here are some of the public benefits to which it holds itself accountable:

•Mission: "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."

 

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.

 

5% of profits go to music and arts education.

 

After one full year of operating as a PBC, here's what the company's reported: 

 

“We think being a PBC and operating sustainably make us more resilient.

We hope that it will let us thrive in good times and give us a thick skin during hard times.

Being a PBC is not a hippie granola thing.”

Kickstarter CEO, Yancey Strickler

Kickstarter CEO, Yancey Strickler

-CEO and co-founder Yancey Strickler

 

More tangibly, here are five key achievements from the Kickstarter 2016 report card:

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, who are 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.