Shearman & Sterling LLP PBCs and the Pursuit of Corporate Good | 42 Shearman & Sterling LLP
THE PBC FORM AS A MANNER OF BRAND MANAGEMENT
The brand of a corporation is typically one of its most critical
assets.
40
With a growing population of investors, customers,
and employees placing greater emphasis on corporate
social responsibility,
41
corporations may adopt the
PBC form because of the positive impact on its brand
promoting a social benefit may have on its ability to remain
competitive in the markets in which it competes.
42
For
example, in its proxy statement sent to its stockholders
to approve the conversion to a PBC, Veeva Systems stated
that converting to a PBC would give customers "increased
confidence to invest in Veeva's technology," enhance
its reputation, and improve long-term financial results.
Converting to a PBC helps enshrine the company's values
into its certificate of incorporation, which in turn sends
signals to investors, customers and employees that the
corporation is committed to promoting a public benefit.
43
Now that the 2020 Amendments have made it easier
to adopt the PBC form, corporations can more easily
consider using the PBC model as a means to shape their
corporate brand.
Adopting the PBC form could also send a strong signal
to customers who prefer to do business with socially
conscious corporations
44
by lending credibility to a socially
conscious label.
45
In fact, studies have shown that 55%
of global online customers would pay more for products
and services that are socially responsible.
46
In its proxy
statement, Veeva Systems proposed stockholders approve
the PBC conversion to "give our customers increased
confidence to invest in Veeva's technology solutions, which
has the potential to make our revenue base more durable
and enhance our ability to invest in innovation for our
customers."
47
Gaining a competitive edge in the market
was considered a significant benefit to Veeva in converting
to the PBC form.
Finally, adopting the PBC model could help retain and
attract employees who are seeking to contribute to society
through their work.
48
Several companies have found it
easier to retain talent when the corporation has a strong
social purpose.
49
In turn, this can lead to less spending
on recruiting and training.
TO CONCLUDE
Delaware corporate law's general deference to the
business judgment of corporate directors grants ample
flexibility to pursue corporate actions for the benefit of the
corporation, including when the corporation's interests align
with that of its customers, employees or community at large.
Notwithstanding the common perception that corporations
are prohibited from taking any action except to the extent
such actions are intended to directly maximize shareholder
value, the DGCL actually requires directors to act in the
best interests of the corporation, writ large. While the best
interests of the corporation may be synonymous with
maximizing stockholder value in many cases, particularly
in change of control transactions, non-PBC corporations,
including several in the Fortune 500,
50
have reminded
the public on various occasions, that corporations do and
must take into account all their stakeholders, and not just
their stockholders, to develop and maintain a thriving and
successful business. So while there may be a public benefit,
as the PBC Code asserts, to taking corporate action in
the interests of non-stockholder stakeholders, the inverse
can also be said, which is that corporate actions that serve
a social good are in the best interests of one or more
corporate stakeholders, and therefore, in the best interests
of the corporation itself.
40
See W.C. Bunting, "Against Corporation Activism: Examining the Use
of Corporate Speech to Promote Corporate Social Responsibility,"
SSRN, 74 Okla. L. Rev. at 245, 248 https://papers.ssrn.com/sol3/papers.
cfm?abstract_id=3893628 (May 9, 2022).
41
See Simmerman, et al. supra note 9.
42
See Veeva Systems Inc, Proxy Statement for Special Meeting 1-3 (2021);
see Simmerman, et al. supra note 9.
43
See Jen Barnette, "FAQ: Delaware Public Benefit Corporations," CooleyGo,
https://www.cooleygo.com/faq-delaware-public-benefit-corporations
(August 6, 2021).
44
Id., Dorff, supra note 7 at 83.
45
Dorff, supra note 7 at 87, See Christopher Marquis, "Public Benefit
Corporations Flourish in the Public Market," Forbes, https://www.forbes.
com/sites/christophermarquis/2021/06/14/public-benefit-corporations-
flourish-in-the-public-markets/?sh=72246458233d (June 14, 2021).
46
See Dorff, supra note 7 at 87 (citing the U.S. Digital Consumer Report).
47
See Veeva Systems Inc, Proxy Statement for Special Meeting 1-3,
at 1 (2021).
48
See Barnette, supra note at 44, Veeva, supra note at 47, Dorff, supra note 7
at 82, 83.
49
See Marquis, supra note 46.
50
Examples include: Apple, Amazon, Walmart, Inc. See "Business
Roundtable Redefines the Purpose of a Corporation to Promote 'An
Economy That Serves All Americans'," https://www.businessroundtable.org/
business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-
an-economy-that-serves-all-americans (August 19, 2019).
