Life on our flat and immobile Earth

[pastorlenny.livejournal.com]

New York State has become the seventh state to pass legislation recognizing that return-on-capital is not the singular aim of all human activity.

Some may not consider it remarkable that businesspeople who embrace ethical imperatives actually require legal protection from shareholders.  But, then again, many do not believe that such an imperative exists -- or that, if it does exist, it is uniquely fulfilled simply by optimizing returns on capital investments.

What are your thoughts about this law and/or the necessity of such a law?

Comments

[badlydrawnjeff.livejournal.com]

What are your thoughts about this law and/or the necessity of such a law?

If there are businesses that want to incorporate in this fashion, excellent!

This is one of those times, however, that I again question the need for government chartering of corporations at all.

[pastorlenny.livejournal.com]

I again question the need for government chartering of corporations at all.

Because without securities, there could be no securities fraud!

[badlydrawnjeff.livejournal.com]

Your logic is impenetrable!

[pastorlenny.livejournal.com]

I am easily penetrated. All you need is some cabernet and a few Barry White CDs.

[badlydrawnjeff.livejournal.com]

Such a romantic perspective on married life!

[sophia-sadek.livejournal.com]

I do detect an order of operations fault. The recycling should be sorted before the teeth get brushed.

[oslo.livejournal.com]

This is one of those times, however, that I again question the need for government chartering of corporations at all.

So you think the owners of a business should be jointly and severally liable for the debts and obligations of the business?

[foolsguinea.livejournal.com]

Alternatively, the CEO could own the business & treat investors as bondholders with no direct authority over the business.

[mikeyxw.livejournal.com]

It would have been very difficult for Google to have gotten their initial investment if the VCs could only have received bonds rather than shares in the company. There certainly is a place for corporate bonds but there is also a place for shareholders when there is so much risk that part of the company is the proper reward in the unlikely situation that whatever wacky idea you have works out.

[badlydrawnjeff.livejournal.com]

Specifically, I don't see why the government needs to be involved with whether a corporation is chartered. That NY needs to make a law like this tells me there's something really strange here.

Good point.

[sophia-sadek.livejournal.com]

John D. Rockefeller was pretty adept at incorporating outside of government circles. It helped that he had a number of state legislatures in his pocket.

[underlankers.livejournal.com]

I'll wait and see how it actually works out before I comment.

[musicpsych.livejournal.com]

I think it's good. I don't think it will change a lot in the big picture or to current businesses, but it will allow and encourage the more "socially responsible" businesses to exist.

[anfalicious.livejournal.com]

Or more likely will become a branding to greenwash undesirable companies.

[musicpsych.livejournal.com]

I don't think so... I don't know much about this law, but it sounds like a company would have to be founded as a benefit corporation, and I would assume the "benefit to society" part would likely be integral to its mission. There would probably have to be SEC filings and red tape for an existing company to become a benefit corporation.

I could see investors not wanting to invest in companies like this because there may be less of a drive to profits. I wonder, too, what rights investors have if these companies fail to live up to the "fiduciary duty" of making a positive impact on society (and how that might be quantified/measured).

[policraticus.livejournal.com]

This would certainly put a new spin on, "I gave at the office."

[mikeyxw.livejournal.com]

"Some may not consider it remarkable that businesspeople who embrace ethical imperatives actually require legal protection from shareholders."

Depends. For most companies, if the management wants to do something other than maximize people's returns, they had better get their shareholder's approval. I suspect you'd be upset if the person managing your pension/401K/whatever started using your money to cut greenhouse gasses in Chile rather than to provide for your retirement. Same thing with the managers of a public company, it isn't their company or money, they are simply trusted to manage it.

That will continue to be the case for most companies, only managers from those who are incorporated using these new rules will be insulated from shareholder's expectations. For most companies, return on capital will still be the singular aim.

[pastorlenny.livejournal.com]

I suspect you'd be upset if the person managing your pension/401K/whatever started using your money to cut greenhouse gasses in Chile rather than to provide for your retirement.

But it wouldn't bother me at all if they were fouling the water supply in Guangdong. As long as I can retire in style!

[mikeyxw.livejournal.com]

These companies are more about using the goods they make to help people, not about making them in a way that doesn't do harm. There is no new legal immunity in this area.

Also, if you are concerned about the water supply in Guangdong, the choices you make as a consumer are going to have more impact than where your 401K goes.

[pastorlenny.livejournal.com]

You mean I can buy a smartphone that is ethically manufactured?

[mikeyxw.livejournal.com]

Depends on your definition. You can get an HTC that is built in Taiwan. Taiwan has decent standards of living and actually enforces environmental standards... to some extent. It will be manufactured mostly by robots however.

Shock, shock!

[sophia-sadek.livejournal.com]

I know little about the need for such legislation, though I have heard positive things spoken about the movement for it. My immediate reaction is that Ronald Reagan must have just rolled over in his grave.

[anfalicious.livejournal.com]

The law shouldn't be necessary, benefit corporations should be mandatory.