Tuesday, October 23, 2012

Guest Blogger: Benefit Corporations in Virginia: What's the Fuss (or Is There Any)?

By Carter Scott

On July 1, 2011 Virginia became one of only four states (there are now seven) to authorize the creation of a “Benefit Corporation”, so named because it authorizes the officers and directors to create a public benefit to society as a whole, in addition to generating profit for its stockholders.

The new law applies only to Virginia corporations, so other forms of business, such as limited liability companies and partnerships, must first convert to corporate form in order to make the election. A similar law applicable to limited liability companies was introduced, but not adopted, in the 2012 legislative session.

The most likely methods of doing so are (i) by a newly formed corporation in its original Articles of Incorporation; or (ii) by an existing corporation filing Articles of Amendment. Both methods require the unanimous approval of stockholders. 

Traditionally, the sole objective of a for-profit corporation has been to maximize stockholder return, and indeed the company’s directors and officers are subject to legal action for failing to do so.  As a Benefit Corporation, the company’s management has added protection from stockholder lawsuits. 

On the other hand, suit may be brought by or in the name of the Benefit Corporation to enforce compliance with the public benefit designated in the Articles, but directors are protected against personal liability and officers are given broad discretion in satisfying the goal. 

The company must prepare an annual report to its stockholders and publish the report on its website, if any, to describe its compliance with the public benefit selected, all of which must be measured by an independent third party standard. 

As long as certain business support, whether financial or intellectual, is dedicated annually to the designated public benefit, the decision is up to the company. The support may be for charity, the environment, religious or educational institutions, or a myriad of other causes, many of which are set out in the statutes. 

While it is obviously too early to tell how this new “social enterprise” model will be received by Virginia business organizations (there are currently less than 20 on file at the State Corporation Commission), published reports by Maryland companies that have adopted that state’s version of the law since its adoption in 2010, suggest that it has created a competitive advantage with potential customers and employees who desire to do business with socially responsible business entities.

Finally, there are around 475 business entities around the country that have been certified as socially conscious by a Pennsylvania non-profit organization, known as B Lab (not connected to the legal form of “Benefit Corporation”), which further supports a trend of public acceptance, and indeed demand, for more public spirited commercial enterprises. Recent articles in the business press generally use the terms interchangeably.

Monday, October 15, 2012

What Makes a Great Boss?

That's the question Matthew Yglesias asks in a new Slate article. The impetus for the question is a working paper from Stanford University and University of Utah researchers called "The Value of Bosses" detailing research into supervisors at an unnamed company.

The researchers reached several conclusions, the most interesting of which is that much of the value of a good supervisor persists even after a worker switches bosses — that is, that a supervisor's greatest value comes from teaching effective work methods.

The paper also argues that pairing the best workers with the best supervisors, rather than having the best bosses mentor weaker workers, leads to increased productivity. Yglesias' article is a good entry point into a study that could have major implications for workplaces that implement its findings.

What makes a great boss to you? What did your best supervisors bring to the table?

Thursday, October 11, 2012

Financial Fitness for the Very Rich: ‘Broke’

Forgive this blogger for the lateness of this review, but CPAs with an interest in financial literacy, financial planning and/or sports should set their DVRs for a rerun of the second-season premiere of the “30 for 30” film series, “Broke.” Directed by Billy Corben (who also directed the University of Miami football documentary “The U” in the first season of “30 for 30”), the film focuses on the alarming numbers of professional athletes who go broke after their playing careers are done.

A 2009 Sports Illustrated article, “How (and Why) Athletes Go Broke,” goes into detail on, well, how and why athletes go broke. One of the athlete workshops mentioned in that article is shown in the movie, and workshop leader Ed Butowsky plays a prominent role.

For those sports fans out there looking for some nostalgia, among the players interviewed are:
  • Former NFL players Andre Rison, Bernie Kosar, Dante Wesley, Keith McCants and Leon Searcy
  • Former NBA players Jamal Mashburn (who, it should be noted, has been remarkably successful as an entrepreneur post-retirement) and Antoine Walker
  • Former MLB players Curt Schilling (whose video-game company, 38 Studios, recently filed for bankruptcy), Cliff Floyd and Homer Bush (another post-retirement success story)

Another strong presence is former NFL player and coach Herm Edwards, who runs league workshops on financial literacy. The criticisms presented in the AV Club review of the movie are valid — Corben might have done better to narrow his focus onto fewer subjects — but overall, it’s a fascinating look at how even multimillionaires can lose it all.

"Broke" next airs on Saturday, Oct. 13, at 6:30 p.m. on ESPN Classic.