Measure Allows Businesses To Incorporate Social, Environmental Missions Into Charters
TRENTON – Bi-partisan legislation sponsored by Senator M. Teresa Ruiz (D-Essex/Union) and Senate Minority Leader Tom Kean Jr. (R-Union) to create a new type of corporate structure in New Jersey that allows for-profit companies to organize in a way that promotes their social or environmental mission today cleared both houses of the Legislature.
“Many companies participate in philanthropic activities, but giving a business the ability to define itself as an entity with a specific mission of improving education or protecting the environment will give it a competitive edge,” said Senator Ruiz. “This bill will allow businesses to boost their bottom line while at the same time working to promote the public good.”
“State government has a responsibility to encourage private businesses to engage in activities that benefit the public,” said Senator Kean. “This legislation will encourage good corporate citizenship and foster greater sense of civic responsibility in New Jersey’s business community.”
The measure (S-2170) would create a new corporate structure called a benefit corporation, or B corporation. Companies under this structure would be organized to advance a public benefit, such as preserving the environment, improving education, or promoting the arts or sciences. The purpose a company chooses to promote would be written into their corporate charter. The structure allows companies to consider the public benefit when making decisions, in addition to economic goals and the interests of their shareholders. Since corporate law traditionally requires that business owners focus exclusively on economic goals and shareholder interests, the measure would essentially shield companies from shareholder lawsuits, allowing companies to place their principles before profits.
New Jersey would become the second state in the nation to implement such a program. Maryland is the only state with the benefit corporation structure in place; Vermont has approved legislation to permit B Corporations, however, the law does not take effect until July.
The Senate approved the bill by a vote of 39-0. The Assembly passed the legislation by a 77-0 vote. It now heads to the desk of Governor Chris Christie.