Monday, February 14, 2011

Flexible Purpose Corporations - California making it legal for corporations to "care" about something other than money

In a previous post, I wrote about shareholder primacy (the law governing corporations actually requires the CEO to pursue shareholder profit even at the expense of other corporate goals or values) and how that makes it very difficult for a corporation to pursue goals that are not directly tied to increasing bottom line profits.

According to this Green Biz blog, California is getting ready to pass a law (2011 SB201) which makes it legal for corporations established in California " include a social and environmental mission that is given equal weight, perhaps even greater weight, than profits..." It protects CEOs and boards of directors in pursuit of such goals and it provides shareholder mechanisms to enforce the pursuit of the same.

That's an improvement.
If you can get companies to stop incorporating in Delaware.
By which I mean that "traditional" motives, training and culture need to change in addition to the law. Profit is so deeply rooted in American culture and history that it is difficult to even see how enthralled by the old ideas we are.