image courtesy Office of the Governor
Governor Andrew Cuomo has just signed a law that creates a new category of company that seeks to benefit businesses across New York State that prove they have socially responsible practices. The new category, Benefit Corporation, is reserved for socially and environmentally friendly businesses, like clean tech and fair trade companies. By registering under the new category, these for-profit companies gain a legal framework. This law, which passed unanimously, will give these ethical for-profit businesses more power in their intended social impact, which will be uninterrupted by their duties and responsibilities to their investors.
The new Benefit Corporation category will allow these businesses to make a profit, while simultaneously striving for their social and environmental missions, instead of the corporation models that require focusing on return to shareholders over other social or environmental intentions. Under the new law, these social businesses will be protected against legal claims from investors, should the company’s profits decline while their social goals press forward.
Businesses that are included under this law can range from small to large. Large green technology companies that give a portion of sales to environmental welfare, ethically sourced farm products that support small farmers, or sustainable businesses that support realistic wages will all benefit from the new law. The law will also encourage these businesses to register in New York State, as some such as UnCommon Goods are operated online, and therefore could be registered anywhere.
The bill was sponsored by Sheldon Silver and Senator Daniel Squadron, and it will take effect in just two months. The impact of the Benefit Corporations could be great, encouraging businesses of any size to use their power to incite social and environmental change, without worrying about the ramifications of declining profit during hard economic times.
Images via Governor Andrew Cuomo‘s Flickr Photostream