As humans, we work hard to balance our lives: focusing on serving, building our communities and spending time with family. We know that money alone is not the end goal. There is often a disparity, however, between our personal lives and our business ventures. I’ve often asked myself, “Why can’t businesses focus on profitability and improving the world? Why are businesses required to ‘maximize shareholder value’ above all else?”
Three months ago, I returned to Utah after living in South America, where I built Brazil’s 2012 Startup of the Year, Baby.com.br. I have spent the last 10 years as a serial entrepreneur and have found that I love building businesses. However, I have long felt that something was missing. When it came time to return to the U.S., I knew that my next business would focus not only on profits, but also making a positive impact.
My first day back, I began meeting with investors in Silicon Valley and New York. Without exception, they loved my vision of building an outdoor gear brand with a humanitarian mission. I had recently heard about a new type of business entity called the Benefit Corporation (sometimes referred to as a B-Corp), so when it came time to incorporate, I elected to become one of Delaware’s first public Benefit Corporations — likely the first registered Benefit Corporation to be headquartered in Utah.
Why didn’t I incorporate here? It simply wasn’t an option. Utah hasn’t yet passed Benefit Corporation legislation. Fortunately, there is a movement afoot that will put Utah in an elite group of states that recognize Benefit Corporations.
In the last few weeks, a Utah bill, SB0133, has seen tremendous bipartisan support and was unanimously passed by both the Senate and the House. The bill introduces Benefit Corporations to the state of Utah and makes it easier for socially minded corporations to flourish. Chief sponsor Sen. John Valentine, a Republican, co-sponsor Sen. Pat Jones, a Democrat, and House sponsor Rep. Keven Stratton, a Republican, have pushed the bill forward. I have been testifying in support of this bill, along with a handful of other business and community leaders, with the hope of helping Utah become a pace-setter for Benefit Corporations.
So, what exactly does a Benefit Corporation do?
A Benefit Corporation is a new type of business that allows for-profit entities to pursue social and environmental goals, along with their focus on maximizing profit. There is no tax advantage to incorporating as a Benefit Corporation — they are taxed exactly like their for-profit counterparts. However, directors are not limited to focusing solely on their bottom lines. With a Benefit Corporation, they also have the freedom to prioritize their social and environmental impact.
Why does Utah need Benefit Corporations?
First, there is wide consensus that consumers prefer to support companies involved in social good: e.g., Ben & Jerrys, Warby Parker and Toms Shoes. Second, we are losing businesses to other states that already offer a Benefit Corporation election. Third, Utah Benefit Corporations will put money back into our communities. Finally, Benefit Corporations are the corporate governance architecture of the 21st century, and no state is better prepared to lead this movement than Utah.
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I’m a believer that capitalism will continue to be a solution to the world’s problems in the 21st century, but commerce needs to evolve. As business leaders, we must do more for people and the planet. As consumers, we should demand more of corporations, supporting companies who do good. It is time for us to live balanced lives and support balanced businesses. My hope is that Benefit Corporations will help us do just that.
Davis Smith is the founding CEO of Cotopaxi, a new outdoor gear and apparel brand with a social mission. He was previously the co-CEO and founder of Baby.com.br, Brazil’s Startup of the Year in 2012. Davis has an MBA from The Wharton School.