Article by B Lab Australia & New Zealand
Image by Alex Knight on Unsplash
In 2013 we started advocating for the benefit company model to be introduced into Australian law. The aim was to enable companies to commit to pursue both profit and positive impact, for directors to consider the company’s impact on stakeholders in their decision-making, and to report on these considerations.
In Australia, company directors have a duty to act in the best interests of the company (among other duties, including a requirement to act in good faith and for a proper purpose). Prioritising shareholders is not an express requirement, and it is not written into the Corporations Act 2001 itself. Yet the idea of shareholder primacy is widespread in the culture and practice of business.
Benefit company reform was solving two problems in the Australian context:
(i) Meeting the Legal Requirement component of B Corp Certification (which differs depending on the legal system); and
(ii) Moving corporate culture from shareholder primacy to stakeholder governance.
A core element of the benefit company model was for a company to amend its governing document, usually its constitution. Two amendments were contemplated: first, a commitment to deliver an overall public benefit, and second, to consider stakeholders (not only shareholders) in decision-making.
The benefit company model also provided a framework for ensuring this practice did not lead to claims against companies for failing to live it up to their commitments, and required them to issue an annual report on their impact. The intention was for any company to have the option to govern and operate its business in this way, not only Certified B Corporations.