The Unexpected Evangelist: Bill Clark, Father of Charitable Corporate Law | The social enterprise magazine

When business lawyer Bill Clark was given a new client in 2009 – the former founders of a sportswear company – he was happy to treat him like any other project, even if he was not too convinced by their request.

This wasn’t just any other client, however: this one would change Clark’s entire career path. And that would lay the groundwork for a different way of doing business across the United States. Because entrepreneurs Jay Coen Gilbert and Bart Houlahan, as well as former private equity investor Andrew Kassoy, weren’t looking to start a new business – they wanted a whole new legal form for businesses looking to balance purpose and profit.

Clark, then a partner at the Philadelphia firm Biddle drinker, worked with the trio and the non-profit organization they had founded, Laboratory B, to create a proposal for this new legal structure. And he was “very skeptical” at first.

“We didn’t know if we would be successful in promoting it,” he says. His old self would have been quite surprised to see how far that would go: since then the legal form has been gradually adopted in one state after another. To date, it has a presence in 34 jurisdictions across the United States, with more than 8,000 charitable organizations around the world, including Patagonia and Kickstarter.

Our best hope

Clark sprinkles references to some sort of higher guiding purpose throughout his story. The handing over of B Lab’s file was a “fortuitous” moment that made him a “believer in the cause”. Looking back, he now considers his entire career – decades of experience drafting corporate entity laws, time spent rewriting Pennsylvania corporate law and serving as a reporter for the National Corporations Act. non-profit – as a preparation for taking over the project of a non-profit society. Clark now sees his religious calling as the pursuit of justice in the marketplace.

Beneficiary companies and B Corp certification

Benefit from companies are traditional businesses, but with more stringent obligations in terms of purpose, accountability and transparency. They are committed to creating public benefit and lasting value while generating profit and are required to report on their progress – in most states annually and using a third-party standard – on achieving social impact. and environmental, at least for their shareholders and in most cases to the public. Shareholders have the same rights as in a traditional business model, plus additional rights, including the right to uphold the company’s social mission.

A bit confusing, B Lab is behind another category of business with a similar name, B Corps. To reach B Corp certification requires adherence to minimum standards on different scores, with assessments to be repeated every three years. There are over 2,500 B Corps certified in 50 countries around the world. Businesses may be structured as benefit companies but not B Corp certified, or vice versa, but many see adopting a legal form of benefits company (if available) as a step towards obtaining of the B Corp certification.

Read more here.

Now retired, Clark is still engaged at Drinker Biddle as an attorney and continues to volunteer with B Lab, promoting the structure of the benefit company and helping other jurisdictions pass the legislation.

What made him go from skeptic to evangelist?

Clark says his pre-B Lab career has been spent “deeply invested in the current system”. He was, he says, “pretty comfortable” – and engrossed in the day-to-day concerns of the family (he’s a father of three) and building a law firm.

Using business as a force for good is the best hope we face right now

“Even though I knew there were problems in the world, I didn’t really focus on how bad they were,” he says. Talking to his new clients made him realize the magnitude of social and environmental challenges – and that obviously converted him to their way of thinking.

“Using business as a force for good is, I think, the best hope we face right now,” he says. Nonprofits are constantly struggling to get more money, while – in the United States at least – the government offers little hope for fundamental change: “Our politics are so fractured and so polarized that I don’t think so. not that the government will be able to do it. something major in the near future. The business community, for its part, offers a “very great untapped source of resources”.

Bipartite support

What support is given to public utility companies?

One indication of the model’s success is its apparent ability to win over both sides of the political spectrum. Surprisingly, in 12 states in the United States, charitable corporation laws have passed unanimously in both legislative chambers.

While liberal-progressives are understandably drawn to the potential outcomes for society, for conservatives one key point is the means, Clark says: the fact that it’s an option available in the free market.

“All we’re trying to do – and I really believe it – is come up with an option,” he says. “We don’t dictate how companies should behave, but we do recognize that more and more companies are succeeding in the marketplace by adopting a more responsible and sustainable way of doing business. We want to encourage that.

All we try to do is provide an option … We don’t dictate how businesses should behave

Similarly, Democratic Senator and presidential candidate Elizabeth Warren proposes, among other things, to require all American companies with turnover exceeding $ 1 billion adopt a new governance model based on the company’s employee benefits model. Criticism of the policy is much less of the concept itself, Clark says, than of the push to make it mandatory, which he says would be seen as “far too radical” to pass.

What about those who are simply not convinced of the value of a new legal structure?

Clark says there is “clearly resistance” from some investors – and the only way to get over that is to “prove to them that this is a better way to use their money than the traditional way.” We must now, he adds, “demonstrate that in fact the model has positive effects, that it does not harm the world economy but that it in fact makes it better. It will take a little while. ”

In the meantime, Clark believes the legal form has done a lot to draw attention to the issues behind it – far more than if companies simply choose to change individually. Because changing the law means people need to know, whether they’re going to pass it or not: about it. ”

Grow

The model takes root beyond US borders: Puerto Rico, Italy, and Colombia have passed charitable corporation legislation, and countries that apply similar legislation include Taiwan, Australia, and Argentina, according to B Lab.

But to make a real difference, many argue that bigger companies should get on board. Still, the question of whether the model works for publicly traded companies is “largely the open question,” says Clark. “We believe this is the case [work], and there are a few big companies that have adopted it. Danone North America, a subsidiary of the French food group, became the largest social benefits company in 2017 (its parent company also committed to having all Danone B Corp subsidiaries certified by 2030).

Whether the model works for publicly traded companies is many still open question

But it’s clearly a much more complicated change for state-owned enterprises. Even the most responsible CEOs often realize they have to “work harder to communicate their vision” to employees, says Clark, not forgetting to do all the groundwork necessary to present a case that convinces shareholders to make the change.

The experience of the Etsy online marketplace is revealing. Certified B Corp, it went public in 2015 without first switching to corporate law benefits – but in 2017 it abandoned the idea, along with its B Corp seal, apparently due to pressure from shareholders. . Switching to the new legal form, wrote the CEO in a blog that year was “a complicated and untested process for existing public enterprises … Etsy should chart its own course to make a positive impact in the world.”

The move was a blow to those who hoped the recipient companies would gain popularity. Getting more companies to change companies before they go public may be the best strategy. In 2017, Laureate Education, a for-profit network of higher education institutions, was the first benefits company to go public – raise 490 million US dollars from investors.

A more united capitalism

Where does the benefits company – and Clark’s career – go next?

With the legislation passed in most of the United States, Clark wants more countries to follow suit and more companies – especially publicly traded ones – to use it. It is also considering how to enforce change more broadly, with cheaper standards that could be adopted by all companies.

This is because, since the adoption of the charitable society ten years ago, the notion of a more benevolent capitalism has been firmly on the international agenda. Clark wants to better connect with initiatives such as the Sustainable Development Goals or the United Nations Global Compact, a voluntary code of 10 do no harm principles for responsible businesses – minimum standards that Clark says society can and should demand of all businesses.

The various initiatives for targeted businesses are slowly starting to connect. B Lab, for example, is developing a online tool enable any business to assess, compare and improve its performance against the SDGs, using measures of its own impact assessment with input from the Global Compact and others. Clark hopes for more collaboration to come up with “an even more aggressive view” of the change. “We all need to come together to find a way to integrate all of this.”

We do not yet know exactly where this will lead: the avocado is at the “ruminations” stage. No doubt he will be guided in the right direction.

Bill Clark will speak on how the Sustainable Development Goals should be integrated into company law at the annual ESELA conference – The Impact Revolution: The Role of Law and Lawyers – on April 12 in London. Find out more and get your tickets here.

Header Image: New York Stock Exchange

Elizabeth G. Ortiz