Shearman & Sterling LLP PBCs and the Pursuit of Corporate Good | 38
WHAT IS A PBC?
There exists a longstanding notion, often cited by
corporate executives and directors, that a corporation's
primary purpose is to maximize stockholder value.
1
In 2013, Delaware adopted a new subchapter of the
Delaware General Corporation Law ("DGCL") that allowed
corporations to form as, or convert into, a public benefit
corporation ("PBC"), a corporation that is expressly
mandated to act not only in the best interests of its
stockholders, but also to act for the benefit of an identified
social good.
Unlike a non-PBC corporation, a PBC is required to state
in its certificate of incorporation at least one specific public
benefit that will constitute part of its overall corporate
purpose. With this expansion of the corporate mandate,
directors of a PBC thus are allowed, or even required, to
consider a broader range of factors (other than stockholder
value) and stakeholders (other than the stockholders)
when making corporate decisions. Alongside the growth
of PBCs, the following question has arisen: are PBC boards
uniquely permitted to pursue social benefits within their
corporate mandate, or are the fiduciary duties of non-PBC
corporations adequately flexible to allow their boards
to do the same?
Under Title 8, Subchapter XV of the DGCL (the "PBC Code"),
a PBC is "a for-profit corporation organized under and
subject to the requirements of this chapter that is intended
to produce a public benefit or public benefits and to operate
in a responsible and sustainable manner."
2
A PBC must
state within its certificate of incorporation the specific public
benefit to be promoted by the corporation.
3
1
For example, the 1997 Business Roundtable statement noted that, "The
principal objective of a business enterprise is to generate economic returns
to its owners." See http://www.ralphgomory.com/wp-content/
uploads/2018/05/Business-Roundtable-1997.pdf (September 1997).
2
See Del. Code Ann. Tit. 8, § 362 (West 2015).
3
See Del. Code Ann. Tit. 8, § 362(a)(1) (West 2015).
4
See Del. Code. Ann. Tit. 8, § 362(b) (West 2015).
5
See Vital Farms, "Investor FAQs," https://investors.vitalfarms.com/investor-
resources/investor-faqs.
6
See Laureate Education, Press Release "Laureate Education Becomes
a Public Benefit Corporation," https://www.laureate.net/laureate-education-
becomes-a-public-benefit-corporation/ (October 2, 2015).
The causes that qualify as a "public benefit" under the PBC
Code are broad, with only the following guidance provided:
a positive effect (or reduction of negative effects)
on [one] or more categories of persons, entities,
communities or interests (other than stockholders
in their capacities as stockholders), including, but not
limited to, effects of an artistic, charitable, cultural,
economic, educational, environmental, literary, medical,
religious, scientific or technological nature.
4
As a result, the stated public benefits of PBCs vary widely.
For instance, Vital Farms, a PBC, states that its "public
benefit" includes "bringing ethically produced food
to the table," and "being stewards of our animals, land,
air and water, and being supportive of our community,"
5
and Laureate Education, a PBC, states its "public benefit"
is "to produce a positive effect for society and students
by offering diverse education programs both online and
at campuses around the globe."
6
PBCs and the Pursuit
of Corporate Good
Lara Aryani and Jess Gorski*
Insights
*Special thanks to Siarah Oliver for her contribution to this article.
20 YEARS
