SB 99: For Whose Benefit?

This week’s Bad Bill of the Week is another repeat offender. SB 99, the North Carolina Benefit Corporation Act, is the same piece of legislation dubbed a “Bad Bill” by Civitas in 2011. This year’s version is sponsored by Senators Peter Brunstetter (R-Forsyth) and Eleanor Kinnaird (D-Orange).

For starters, the underlying premise of creating a “benefit corporation” is that traditional corporations and companies don’t benefit the public. This notion, of course, is ludicrous. As Francis DeLuca noted in the 2011 Bad Bill summary:  “A lawful, profitable business, by its very existence, already ‘benefits’ society…A business, by making a profit, increases the wealth of society and hence the ability of individuals to find employment and increase their standard of living. They also provide products and services that make our lives better.”

Moreover, upon reading SB 99 we discover how the state would evaluate whether or not a company is a “benefit corporation.” According to the bill, “a benefit corporation shall have as one of its corporate purposes the creation of a general public benefit.” The legislation defines “general public benefit” as: “A material positive impact on society and the environment, taken as a whole, as measured by a third-party standard.” (Emphasis added.)

This passage provides a major clue suggesting that SB 99 seeks to enforce the activities of companies according to certain standards of environmental impact and sustainability measures. And who provides this “third-party standard?”

A non-profit group called “B-Lab” is the primary third-party evaluator of B-corporations.  One of the perks of becoming a B-corporation is joining a network of other companies to take advantage of discounted services provided by other B-corporations (the list of members confirms B-Lab’s mission of largely promoting “sustainability” measures). Over time, however, it would not be surprising if B-corporations begin to seek favored tax statuses as well.

Oh, by the way, B-Lab doesn’t appear to provide “third-party” approval for B-corporations out of the goodness of their hearts. According to this New York Times article, it can run up to $25,000 for a corporation to join the membership rolls of B-corporations.

What a nice scam for the B-Lab folks: pressure state legislatures to enact laws recognizing B-corporations based upon your approval, then charge for that approval.

If companies want to adjust how they spend their money or their “environmental impact,” they should be free to do so and free to contract with consultants to evaluate and improve their efforts. There is no reason why legislation needs to interject itself into this process. It doesn’t seem far-fetched to believe that this scheme was cooked up by B-Lab as an effort to use legislative authority to line their pockets. One also should be concerned with the use of legislative muscle to advance often highly questionable “sustainability” measures, as well as the potential for B-corporations to seek government privileges in the future. For these reasons, SB 99 is this week’s Bad Bill of the Week.