By Lee Howard The Day, New London, Conn.
A new type of corporate entity would be recognized in Connecticut under legislation Gov. Dannel P. Malloy said Tuesday he would introduce in the coming session of the state's General Assembly.
The benefit-corporation designation offers legal protections to businesses that intend to promote the public good as they seek private profit.
Under the state's current legal framework, the boards of directors of businesses have a fiduciary obligation to benefit shareholders without the requirement that they evaluate or report on a company's performance in other realms, but Malloy's legislation would offer a "safe harbor" to benefit corporations that also consider environmental and societal good.
"By creating a new corporate entity ... Connecticut entrepreneurs can start businesses that compete in the private sector while also working to solve the toughest social and economic problems that our communities face," Malloy said in a statement.
"This legislation will help ensure that social entrepreneurs create benefit corporations and jobs here in Connecticut, and encourage a new generation of social entrepreneurs dedicated to improving our communities and our state."
Similar legislation has been approved in 19 states, among them New York, Massachusetts, Rhode Island and Vermont. The first such bill won the backing of California legislators.
According to a white paper posted on benefitcorp.net, many states have an "outdated legal framework that is not equipped to accommodate for-profit entities whose social benefit purpose is central to their existence."
Malloy's proposal places benefit corporations under traditional business corporation laws while requiring them to be assessed annually by an outside entity to determine the extent of their positive social impact.
Benefit reports must be shared with shareholders and the public.
Benefit corporations get no special tax exemptions. But they often do include public benefits as part of the corporation's stated purpose, including providing low-income citizens with products or services, promoting economic opportunity beyond job creating and improving community health care.
"There is a clear demand for this new form of business structure," Kate Emery, chief executive and founder of the Hartford nonprofit reSET, the Social Enterprise Trust, said in a statement. "
We will work hard to attract bipartisan support for the bill, and look forward to speedy passage and adoption into law this year."
Malloy said the legislation would be introduced during this year's General Assembly session starting Feb. 5.