Today I had the opportunity to give testimony in support of Benefit Corporations at the Montana Legislature’s House Committee on Business & Industry. HB 258 is the bill, and the amazing Representative Kathleen Williams is the primary sponsor for this legislation, which was attempted in the 2013 session but didn’t pass as time ran short in the session. Happens, as we only have the legislature in session for 90 days every two years, but it sucks that this didn’t get through last time. Repeating work drives me batty, but Rep. Williams was cool, collected and on target with her opening and closing statements. (Quick shout out to Rep. Zach Brown, who we reached out to first to help us, and who has been super supportive from the get-go.)
The formality of giving testimony on a bill is interesting, but the best part of today was the overwhelming support of the bill. From the state Chamber of Commerce to several businesses, including mine, there were plenty of people there to show their support.
There were no opponents.
That’s a big deal.
The one issue is that even the committee members were a tad confused about the exact details. After all, the bill is 10 pages of very dense legalese, and many of them were just getting to see this for the first time. Lots to take in.
If you haven’t read the bill, don’t worry, here’s the basic gist of it:
A standard C-corp has one goal, and one goal only, by law and judicial ruling: make the shareholder’s money. That’s it. Nothing else can come above that goal. Nothing. If the board or the executive team do something that negatively impacts shareholder value, they can be sued, and by law, they will lose and it will suck.
A Benefits-corp has a goal that comes before making money.
That’s it. Generally, the goal that the company chooses needs to be a social or environmental good, and the activity done in support of that goal must be documented and audited by a third party organization, but that’s really the only difference.
Tax-wise, we’re still a c-corp, we still pay taxes, we still have the obligation to be profitable enough to remain in business, and we can sell stock and have investors so we can continue our business. We just have a higher goal that making money hand-over-fist.
What does this mean in the real world? Well, good question, and I’m going to speak a bit early about something that I’m involved in, but it won’t hurt to go public with a bit of this now, since I essentially did it this morning anyway.
Treasure State Internet, provided the Benefits-Corp bill becomes law, will have a stated goal of “Providing fiber-optic internet service connections, or, should the technology evolve to be faster in some other media then that newer faster media, to every home and office in the State of Montana”. Ugh, what a mouthful, and frankly, there’s a good chance that will be rewritten a thousand times before we lock it down. I generally say “The fastest fucking internet to every fucking home and office in fucking Montana.”
Because we fucking want to.
See, if a C-corp tried to lay fiber to Roundup, MT (to pull a place out of my hat) they’d have to get grants from the feds to lay that connection. Why? Because if they used their profits to do so, the shareholders would have every right to sue the living daylights out of the board and the executives for it. The ROI would be so low, and so far out, as to be considered zero by the market and, therefore, by the court. This is why true broadband internet service is slow to get to rural America. There’s very little in grants, and the big companies don’t want to deal with the headache.
But when we, a B-corp, decide to take some profit from our current income and re-invest itÂ in laying a pure fiber-optic connection to Roundup, Two Dot, and Radersburg, we not only have the option, we have the responsibility to do so.
During questioning by the committee it became apparent that a few members were confusing “donating to a charity” with being a Benefits-corp. They aren’t the same thing at all. The donations are a great way for the company to support local arts, community events, and directly help their local communities, but those are generally “marketing” in a very real sense. They aren’t core to what the business actually does. A Benefits-corp, again, has the responsibility to use it’s profits not to line the pockets of shareholders, but to improve the world around it, in a very real, tangible way, in the course of it’s every day business. There’s a massive difference in those things, and I’m not sure how the confusion arose, I just hope that clears it.
We need this bill to pass. Sorry, it’s 10 pages of updates, and I know the fine folks over in the Secretary of State’s office that compile and control the Montana Code AnnotatedÂ and the ARM, and I despise having to create more work for them. It’s not like anyone really enjoys mucking up the MCA. It’s a massive, complex, tedious expanse of text that most thinking individuals actively avoid touching in any way at all. However, this is needed. It gives us more freedom to do good for the state.
In fact, it’s the single easiest way to make the Last Best Place an even better place to live.