Could the B Corp mean the end of CSR?

I have never really understood the real social benefit of B-Corps other than employing a lot of third party auditors.  Now I think they may actually be dangerous.  At a recent paper presentation by Alicia Plerhoples, a professor at Georgetown University, I learned that recent ruling in eBay v. Newmark may be the beginning of the end for CSR, and B corps are to blame. Read the following opinion from the case (bold added):

Chancellor Chandler: “In the recent “[Newmark and Buckmaster] did prove that they personally believe craigslist should not be about the business of stockholder wealth maximization, now or in the future. As an abstract matter, there is nothing inappropriate about an organization seeking to aid local, national, and global communities by providing a website for online classifieds that is largely devoid of monetized elements. Indeed, I personally appreciate and admire [Newmark’s and Buckmaster’s] desire to be of service to communities. The corporate form in which craigslist operates, however, is not an appropriate vehicle for purely philanthropic ends, at least not when there are other stockholders interested in realizing a return on their investment. Jim and Craig opted to form craigslist, Inc. as a for-profit Delaware corporation and voluntarily accepted millions of dollars from eBay as part of a transaction whereby eBay became a stockholder. Having chosen a for-profit corporate form, the craigslist directors are bound by the fiduciary duties and standards that accompany that form. Those standards include acting to promote the value of the corporation for the benefit of its stockholders.”

What he is referring to is the CHOICE that firms have now in corporate forms. In Delaware, firms can chose to be a B-corp, which means that they have certain social goals as well as financial.   What this ruling states is that since they chose NOT to form as a B-corp – they made, in essence, a choice for shareholder primacy.  This ruling could be the precedent for future legal decisions on the social role of corporations.

Ironically, we never needed the B-corp for firms to pursue social goals (see Lynn Stout’s work on the Myth of Shareholder Primacy).  Managers have a great deal of discretion in this arena. You can even alter a corporate charter to explicitly state social goals.  (The B-corp for some states is a good way to keep auditing companies employed, however, a process which may help some companies.  You don’t, however, need a new corporate form for a process for continual improvement).

However, this managerial discretion may start being reduced if courts see a managers choice to not incorporate as a B-Corp as a clear indicator of preference for shareholder primacy.

Target still failing with images of teens

The internet has been buzzing about Target’s recent “Photoshop Fail” – where the thighs of teen models were clearly changed so that they had a “thigh gap,”  the latest trend for teen girls which can only be attained by many by basically starving your self.   Taking another look at the Target web site, however, it is clear that while the obviously photo-shopped photo was removed, they still have much to apologize. Looking at other pictures of teen girls in suits, it is clear that they too have been photo-shopped to create a thigh gap.  Take a look at this picture or this one.  These are actually worse than the one where the entire crotch is removed, because they are subtle enough to seem realistic.  Girls are already under enough pressure to be unrealistically thin, why not show real pictures of real girls?

The Carbon Tax – its good business!

The knee jerk reaction of industry to new environmental regulation is usually to fight it, with arguments that it is too onerous, not needed, or would be technically impossible to meet.  Other times, they simply let congressional gridlock take it’s course. This has been the case in the climate change.  There are other options for business approaches to regulation. There are cases, for example,  where industry has used regulation as a source of competitive advantage. one such example is Monsanto’s pivotal  role in the negotiations for a global agreement to deal with the ozone hole.   Other times, they see the “writing on the wall” and push for regulatory approaches that are more desirable than those being proposed.  This latter strategy could be a critical one for industry as the Obama administration pushes for greater regulation of GHG.  Given the inability of congress to pass legislation on GHG, Obama has pledged to use the existing CAA as a means to reduce GHG emissions. Industry took the traditional approach with this threat, and sued the EPA over the constitutionality of this approach, and lost. Now it is time for them to switch tactics.

Using the CAA to regulate GHGs is economically inefficient.  the CAA was designed to control point source emissions primarily through end of pipe technology (Best Achievable control Technology (BACT) in some cases) and strict emission limits. Does this approach, however, make sense for GHGs?  Unlike particulate emissions, they are a pollutant that is global in nature. Moreover, they may require time-consuming and expensive BACT review. (

The response of industry may be to simply fight these regulations.  However, they are unlikely to achieve anything other than incremental changes and delays.  The other option is to push for a more economically efficient approach, in replacement of regulation under the clean Air Act.  The advantage of a Carbon tax that it is simple and lets reductions be done in the most economically efficient way. Perhaps more important, as costs are passed onto consumers, it will drive changes in consumption behavior, which is an essential part of addressing climate change.  this could also benefit companies.  consider the US auto industry, who struggles with consumer demand for gas guzzlers while they were faced with lower CAFE regulations.  they basically had to give small cars away.  When gas prices increased, consumer demand shifted, allowing them more flexibility in the product platform.

Some companies (and conservatives) have seen the light -Ex-Rep. Bob Inglis’s (R-S.C.) Energy and Enterprise Initiative is leading a “growing coalition of conservatives offering the country real solutions for energy security and climate change.” ( They support a carbon tax. Exxon has come out in support of a carbon tax (  “Combined with further advances in energy efficiency and new technologies spurred by market innovation, a well-designed carbon tax could play a significant role in addressing the challenge of rising emissions,” Kimberly Brasington, a spokeswoman for Exxon, said in an e-mail. “A carbon tax should be made revenue neutral via tax offsets in other areas.” Other companies who have come out in support of a Carbon Tax are (from are Royal Dutch Shell, Swiss Re, Statoil, and Kodak, BPEDF Energy , Caterpillar, Duke Energy, FedEx CEO Fred Smith.

Any smart company will see that GHG regulations will happen and need to happen. now that the threat of extensive regulation through the CAA is real, this is the opportunity to partner with industry to push our reluctant legislators  for market based mechanisms instead. It might be time for legislators in favor of a carbon tax to reach out to industry to build a broader base of support.  One problem is that the CAA is no longer a threat, and companies are concerned that they will need to contend with both CAA and a tax. However, legislation, and in turn regulations, CAN be changed AND there are many firms not touched by the current CAA regulations.  Legislators should reach out to forward thinking companies and together they can work the system to convince others (particularly republicans against a carbon tax or democrats too afraid to support it) to see that it makes both environmental AND business sense.


Ebook is out…a page turning thriller!

Rae Daly is a young activist and recent law school graduate whose life and career are put in jeopardy when she accidentally wounds a police officer at a protest rally. To avoid prosecution, Rae agrees to help the FBI infiltrate a dangerous cult known as the Premillennial Church of God. But to do so, she must pose as a woman wanted for the murder of an abortion provider. In the end, it’s up to Rae to prevent the cult’s charismatic leader, the Prophet Emily Chandler, from carrying out a vast deadly scheme.  As Rae embarks on this task, she learns that the case is more complex, and more personal, than she ever could have imagined.

smashwords for Nook


Xtranormal student submit xtranormal ethics videos.

We had our second annual Xtranormal Contest yesterday and it was a great success. Entrants were asked to create a video using Xtranormal depicting a complex ethical dilemma. All the entries were very strong, but in the end the winners were:

Second place went to: Dilemma Dilemma by Sanchit Khera

Please see all of our entries – and vote on your favorite here.

New Rules for Corporations

In my class, we talk about the concept of shareholder profit maximization. In reality, managers have discretion regarding how they balance their obligations to different stakeholders. Slowly, States are starting to codify this right by passing legislation that explicitly gives permission for companies to allocate resources for social issues. The most recent of these is the Corporate Flexibility Act of 2011 (download – pdf), introduced in California’s State Senate on February 8, which would allow a new form of for-profit corporation that permits “companies to pursue other things besides simply making money.”



Are we measuring the right thing?

I came across this great article today – Beyond Money: Toward an Economy of WellBeing.  It focuses on a critical question – how do we measure success.  This article focuses on the national level and it reminiscent of the ideas beyond the Country of Bhutan, which in 2006 Business Week magazine rated the happiest country in Asia and the eighth-happiest in the world.  But, this question is relevant at all levels. My guess is that most people look at the wrong measures at both the personal and organizational.  Instead of creating false material needs (pet rock anyone?) that do not lead to happiness, can business create produce and services that help people do and experience the things that lead to true happiness?