In August 2019, a group of nearly 200 chief executives issued a statement, arguing that the role of corporations should be redefined from solely maximizing shareholder value to also “invest[ing] in their employees, protect[ing] the environment and deal[ing] fairly and ethically with their suppliers.” Making that shift is hard when boards of directors are subject to the standard fiduciary duties applicable to Delaware corporations, but being a standard Delaware corporation is hardly the only option available to a profitable business, even a publicly traded company.
Public benefit corporations (PBCs) are a special flavor of Delaware corporation. They are statutorily required to pursue the creation of one or more public benefits as set forth in their certificates of incorporation, including, potentially, considering the interests of stakeholders such as employees, customers, and members of the community. Accordingly, the board of directors of a PBC has a fiduciary duty to weigh additional considerations when taking corporate action, beyond those of a board of directors of a traditional Delaware corporation. In times of plenty, this additional fiduciary obligation rarely creates a tension for PBC directors, as companies and shareholders that have opted into the PBC standards often have business models where social or environmental impact and financial returns inherently tend to be aligned.
However, in periods of economic stress—which we face today as a result of the coronavirus pandemic—directors may be required to make difficult decisions if a PBC faces a tradeoff between pursuing its social or environmental mission and protecting shareholder value. This alert outlines some of the key issues that PBC directors should consider when balancing these interests.