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April 21, 2015

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The charitable side of capitalism

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Help the economy and improve quality of life for my constituents and the state as a whole. As an assemblyman representing Reno, those are the goals that have guided me since I was elected in 2006. Often and unfortunately, the perception is that one of these goals must be sacrificed for the other. Every once in a long while, an idea comes along that is really in everyone’s best interests, regardless of your political disposition or view on the role of government in our society. I believe that the benefit corporation is such an idea.

Benefit corporations are private for-profit businesses acting just like other corporations seeking to generate revenue. However, unlike normal corporations, benefit corporations are obligated by their voluntarily elected corporate structure to consider the consequences of their actions on both society and the environment, along with profit, when determining how to run their business. The overarching responsibility for a benefit corporation is to have a positive material effect on society and the environment.

Most people are surprised to hear that if faced with a choice between doing the right thing and the profitable thing, corporate officers are often legally bound to maximize profits for shareholders and choose the profitable thing (if legal), even if that choice may have negative effects on society and the environment.

Assembly Bill 89 would change that in Nevada. The bill, which I am sponsoring, would allow businesses to organize themselves as benefits corporations. Businesses that do so would be allowed to consider other factors beyond profit in their decision making.

Normal corporations are essential to society and are remarkably successful tools for providing for our everyday needs. Imagine the transformational power the private sector could have if given the freedom to think beyond profit. This would not only be good for society but also the expansion of the free market and the entrepreneurs that innovate.

Clever and entrepreneurial people, who do their best to run successful and profitable corporations in Nevada and beyond, are essential to our state’s economic prosperity. However, investors and those who run corporations should have the ability to do so in accordance with a structure of their choosing. Benefit corporation legislation is a way to deregulate the purpose of a corporation. Those who choose to take advantage of this new structure would be taxed like other types of corporations, so it would cost Nevada nothing to implement.

The other side of the equation for benefit corporations is that they provide opportunities for investors to put money into causes they believe in while hoping for positive financial returns at the same time. They also provide more choice for consumers, who may choose to pay a little bit more for a product that they know has some collateral societal or environmental benefit.

Benefit corporations voluntarily agree to produce an annual benefit report, which is a great economic development tool for Nevada since it provides investors and consumers clear information of the companies’ qualitative activities.

There are many examples of benefit corporations that are both profitable and achieving a material positive impact. The outdoor clothing company Patagonia is a benefit corporation. Patagonia has an outlet in Reno that employs a large number of people. The high-quality jobs are sought after in the Reno community because Patagonia has dedicated itself as part of its benefit corporation status to high quality of life for its employees and environmentally sustainable manufacturing. Another example is Greyston Bakery, a baked goods company in New York, that as part of its benefit corporation status offers employment to people leaving the criminal justice system in hopes that they can be rehabilitated and become productive members of society. There is no limit to the ways that the benefit corporation model can be used to harness the power of capitalism to make the world a better place.

Benefit corporation legislation has already passed in 12 states and the District of Columbia, and with bipartisan support for AB89, I’m hopeful the Legislature will act this session. Given Nevada’s high quality of life and business-friendly climate, it is my hope that many benefit corporations will choose to make Nevada their home.

Assemblyman David Bobzien, D-Reno, is a primary sponsor of AB89.

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  1. A great idea! I hope the legislation passes. No reason not to have another option that I can see.

  2. Sounds like a win win all around. I would be the first to say that the US and our business leaders, stockholders and stakeholders have short term vision usually from one quarterly results to the next. A long term view would do us all well.


  3. AB89 seems to be a means to give legal standing to what was once called corporate social responsibility. Its simplicity excludes tax breaks and taxpayer support. I'd buy that.