If Canadians wish to invest in a company that is committed to acting “responsibly and sustainably,” should government facilitate that investment? That question is now before the British Columbia Legislature.
Bill M 209 was introduced in the B.C. Legislature on April 10, 2019 (its previous incarnation was Bill M 216 and was in second reading prior to the last Throne Speech). Bill M 209 would allow any company to designate itself as a “Benefit Company”. A benefit company would be required to act responsibly and sustainably and to pursue the public benefits set out in its articles. Examples of “public benefits” might be the provision of quality jobs to underserved members of the community or delivery of goods and services in a carbon neutral manner.
Benefit companies would operate within the same legal framework as other B.C. companies, with a few important exceptions. The fiduciary duty of directors and officers would be modified to require pursuit of its benefit purposes, alongside the obligation to pursue the interests of the corporation. Directors and officers would be protected from additional liability resulting from those modified duties. Benefit companies would be required to publicly report against an independent third-party standard with respect to its public benefit commitments.
Why would anyone want to invest in a benefit company? Simply put, investors have complex priorities. Many investors believe that social and environmental impact is as important as financial return. There is also evidence that, over the long run, shareholders can improve their returns by investing in sustainable enterprises. Investors already choose to invest in companies formed under social enterprise laws available in some provinces, or in companies that are contractually bound to create a social and environmental impact. A legislative framework would provide another alternative for such investors, and is particularly suited to companies that wish to operate traditional businesses in a responsible manner.
Some legal scholars and practitioners argue that legislative change is not necessary in Canada because Canadian corporate law already allows directors to take into account the interests of stakeholders other than shareholders. That is not quite right. Yes, the Supreme Court of Canada has stated that it may be legitimate, given all of the circumstances of a given situation, for the directors to consider the interests of employees, consumers and the environment (among other things).
The federal corporate statute is being amended to codify this concept. That is not steady enough ground for directors, at least those who are aware of how closely their decisions can be scrutinized. It is also not a stable enough legal basis for entrepreneurs and investors who want to know that the interests of affected stakeholders will have standing in the boardroom, separate and apart from the interests of the corporation. If government wants to support this type of investment, directors and investors need clear statutory rights and responsibilities. Bill M 209 does this.
Benefit corporation statutes have been adopted by well over half of U.S. states. Critics of the B.C. approach say that it is a copy of the U.S. approach and not appropriate for the Canadian environment. This is xenophobic and ignores the carefully considered provisions of Bill M 209. Bill M 209 would create a statutory regime that is clearer, fairer and more accountable than what is provided in any U.S. statute.
The relationship between the corporation and the society within which it operates is in transition everywhere in the world. The investment premise for business corporations that prioritize sustainability and social purpose has been proven. In Canada, investors and entrepreneurs are looking for the ability to lock in environmental and social purpose and need a legislative framework within which to do this.
It takes only one jurisdiction in Canada to get the ball rolling. British Columbia has already become the jurisdiction of choice for many businesses because of its updated corporate law. The B.C. Legislature should be encouraged to move forward with this important initiative and give investors a new opportunity to invest in a social purpose if they wish.
At this point, the question for the British Columbia Legislature is not why, but why not.