Ice cream entrepreneurs Ben Cohen and Jerry Greenfield wish a bill making its way through the Vermont legislature had been law decades ago.
If they had been allowed to set up as a benefit corporation their Ben & Jerry’s Homemade Inc, the Vermont-based super premium ice cream maker, they might not have had to sell out to the British-Dutch conglomerate Unilever 10 years ago this week.
Benefit corporations are devoted to a triple bottom line of “people, planet and profits,” said Andrea Cohen of Vermont Businesses for Social Responsibility.
Under legislation now proposed in Vermont and other states across the US, they would have their status as a benefit corporation — with an annual report on goals like environmental protection and community involvement — written into their charter. That would better enable them to dodge a takeover based purely on finances.
Vermont state Senator Hinda Miller, a principal sponsor of the Vermont legislation, said a benefit corporation could resist a takeover bid — and protect its social mission — even in the face of a lucrative price-per-share offer.
“It gives the board of directors the ability to say no to someone who is offering a good price for the stock,” said Miller, a state Democrat. “They can say: ‘Thanks for the great price, but we’re not going to sell because we have obligations beyond the price of the stock.’”
To earn and maintain its status as a benefit corporation, a company would have to file an annual report, available for public review, listing and detailing progress toward goals like lowering carbon emissions, providing health care for part-time workers, or giving employees time off for community service.
Benefit corporation bills have been introduced in Maryland and Vermont and are expected to get a hearing next year in Colorado, North Carolina, Pennsylvania and Washington state, said Jay Coen Gilbert, co-founder of B Lab, a Philadelphia-area nonprofit promoting the benefit corporation idea.
Similar legislation is expected to be filed in coming weeks in New York.
Maryland’s has cleared both legislative houses and is awaiting action by the governor. Vermont’s has passed the Senate and is expected to win House approval and then be signed by Governor Jim Douglas.
Under traditional corporate law, a company’s first duty is to maximize shareholder value. If Ben & Jerry’s had declined the 2000 offer of US$43.60 per share from Unilever — nearly 25 percent above Ben & Jerry’s closing stock price a day earlier — it likely would have faced shareholder lawsuits, said Cohen and Greenfield, both now 59, in an interview.
As a benefit corporation, Cohen and Greenfield, hippie capitalists known for creating quirky flavors like Cherry Garcia and Chunky Monkey, would have been better situated legally to rebuff Unilever’s offer and continue their tradition of holding a free folk-rock festival to coincide with their annual meeting.
B Lab has two strategies. One is trying to get states to give legal backing to companies that want to fashion themselves as benefit corporations. The Vermont bill calls on companies to hire an outside director to monitor their efforts and produce an annual report on what the companies’ social goals are and how well they are progressing toward them.
A second B Lab strategy is its “Certified B Corporation” program, something akin to the Good Housekeeping seal of approval.
To get that, companies must take a 90-minute survey, with questions on everything to whether the company uses tax shelters to whether it offers paid maternity and paternity leave.
Answers are graded on a point system, and companies that get a score of better than 80 out of a possible 200 can become Certified B Corporations.
So far, 285 corporations, with US$1.1 billion in combined annual revenues, have met the standard for certification, Gilbert said.
“But it is not legally recognized” until states pass laws doing so, he said.
Greenfield and Cohen said Unilever, which still employs both of them, generally has been good about pursuing a social mission, but could have been better.
They cited the company’s recent announcement that it would source chocolate, nuts and other ingredients from suppliers that observe “fair trade” practices designed to avoid exploiting agricultural workers in developing countries.
“We were asked, would we have made that commitment sooner if we were not owned by Unilever,” Greenfield said. “We answered yes, which I think some people at Unilever were not that happy about. But that’s the reality of it.”
Cohen said he wasn’t sure the new law would provide enough protection, in every case, from a hostile takeover, but added that it was worth a try.
“The more defenses that you have and the more legal roadblocks to having the company taken over by an entity that doesn’t share that social mission, the better it is for keeping the interests of the community at heart,” he said.
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