Many companies have long had a focus not just on earning a profit, but also on improving their communities or pursuing social goals. Yet, generally speaking, directors of for-profit companies are required to act solely for the ultimate purpose of maximizing the financial returns to shareholders.
Senate Bill 21, however, would expand the choice of business forms available in Ohio and allow for the merger of those two objectives by permitting a corporation to be formed as, or an existing corporation to become, a “benefit corporation.” A benefit corporation is one that is able to explicitly focus its mission on beneficial purposes, such as community or societal issues. It allows companies to place themselves somewhere between being a strictly for-profit business and a non-profit, community minded organization.
This week, the Ohio Chamber offered our support for SB 21, believing it would help make Ohio more business-friendly and give businesses the same innovative flexibility and choice of business form already available in 34 other states.
The structure gives company leaders more flexibility when considering how to balance profit interests with the company’s social concerns, and also provides transparency to investors who need to know whether a business is focused on seeking profits or has a broader mission. It could also help attract young workers who, according to the 2018 Deloitte Millennial Study, are “eager for business leaders to be proactive about making a positive impact in society.”
In addition, it would facilitate access to new sources of investment capital that are directed at benefit corporations. Some estimates suggest that the value of the current social impact investing market in the U.S. is nearly $9 trillion. By authorizing the creation of benefit corporations in Ohio, SB 21 provides an additional tool with which companies can attract more of these investment dollars to Ohio.