Socially responsible corporations do exist, thankfully. Socially Responsible Investing means investing in them. It’s the only way to save the planet.
The good news for America and the rest of the world is that good, socially responsible corporations do exist. We, as Americans, should be investing in them — and in no other corporations on the market!
A socially responsible corporation attempts to maximize profits, of course, but only to the extent that what they do, what they produce, and the by-products of that production are good for society, and good for humanity. That’s huge. It’s a big departure from the “profit above all else, progress at any cost” philosophy of the 20th century.
A Simple Choice
Think of it this way… There are two companies you can invest in:
Company A makes a bigger profit. It also pollutes the air you breath and the water you drink. It grows tasteless foods that make you sick, and then sells you drugs to make you better. And it uses so many tax loopholes that it starves the government, so the road you take to work is riddled with huge, gaping potholes.
Company B makes a smaller profit. But your air and water are clean, your food is healthy and tastes great, and you won’t break your neck falling into a pothole on your way to work.
Which company do you invest in? Simple choice, right? What good is an extra few bucks profit when you’re living in misery and you kill yourself in a pothole?What good is more profit when it's killing you? Click To Tweet
Well, American investors face that choice every day. And the choice is nearly as simple. There are socially responsible corporations whose charters allow them to “do the right thing”, and there are barbaric corporations with old charters who are required by law to maximize profits, to the exclusion of all other considerations.
Only one of them is an intelligent investment.
Killing the Cancer
In a very real way then, irresponsible corporations are a cancer on the planet — and we are the immune system. The very real facts of the matter are that those corporations have (in America, especially):
- Polluted our air, water, and food.
- Given us the mostly costly medical system on the planet.
- Given us the lowest levels of health on every possible measure, of all countries on the planet.
- Blocked all attempts at universal health care.
- Effectively taken control of government.
- Prevented badly needed reforms.
To solve those problems, we need to buy from — and invest in — socially responsible corporations. Which now, by law, can exist.Irresponsible corporations are a cancer on the planet -- and we are the immune system. Click To Tweet
The problem corporations, of course, are those that put greed and profit above all other considerations. Unfortunately, those that do have the legal defense that they are required by law to do so, by virtue of the very nature of their incorporation.
However, there are new forms of corporate charters that can provide an antidote to the problem, and in the process remove the legal defense currently enjoyed by irresponsible corporations.
New Corporate Charters
For most businesses, money is the overriding factor. Those corporations make decisions based on how they affect the bottom line and, in turn, their shareholders. In fact, the directors have a legal responsibility to maximize the profits of the organization and ensure the long-term viability of the organization.
But there are a couple of new organizational charters that are different:
- Benefit Corp (large organizations), or an
- L3C (small ones)
To really make a difference, we should enact a law that automatically converts all existing charters to a socially-responsible form. But until we can get such legislation passed, the best we can do is to favor corporations that act responsibly — both with our purchases, and with our investments.
Benefit corporations differ from standard corporations, in that they must consider the impact of their decisions on society and the environment, in addition to the impact on profits and the bottom line.
As mentioned in Nonprofit Isn’t the Only Option:
A benefit corporation’s purpose might be similar to a 501(c)(3) in that they are required to make a positive impact on society or the environment. Beside the ability to share profits with officers and shareholders, a benefit corporation might be a more attractive option because it could draw more investors and employees as a mission-driven organization. Plus, as a private company, it can be active in politics without restrictions.
The downside is that benefit corporations aren’t available everywhere. As of September 2015, 30 states have passed legislation, while others are working on it. (California, for example, provides for a Hybrid Corporation.)
A Low-Profit Limited Liability Company (L3C) is a form of an LLC geared toward impact-driven companies. It bridges the gap between nonprofit and for-profit and allows owners to accept donations and program-related investments, or PRIs. It is still a for-profit entity so they can still make profits, but donations and PRIs are not tax deductible.
Socially Responsible Mutual Funds are Needed
One of the biggest sources of investment are retirement savings in the form of 401k’s and IRA’s. Virtually all of those funds are managed by a mutual fund, which is in turn operated by a for-profit company.
To have an impact on the way corporations operate, investors need to prioritize socially responsible corporations. But if mutual fund managers are required by law to maximize profits, then they are effectively precluded from doing so.
To begin to make real progress with Socially Responsible Investing, therefore, there are three requirements:
- Have mutual funds that are managed by Benefit Corporations.
- Make those funds available to employees when they are choosing retirement funds to invest in.
- Educate all employees everywhere, so they know that they need to choose a socially responsible fund.
If and when all three conditions are met, we can make a big difference in the way our society operates. (But if we can get legislation passed to require social responsibility, so much the better!)
- What is a Benefit Corporation?
- Nonprofit Isn’t the Only Option: Benefit Corporations, B Corps and More
- A Jargon-Free Guide to Low-profit Limited Liability Companies (L3C)
- California Hybrid Corporation
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