One of the prevalent belief is that corporations were set up solely to maximize profit to shareholders. Unlike other business models, corporations have the sole status of being viewed as a ‘legal person’, with the rights similar to natural citizens including “engage in business and contracts, initiate lawsuits, and itself be sued” (Business Dictionary). This unique classification provides corporations with the rare opportunity to take advantage of the power corporations have to benefit society and the economy. One such example is the potential for companies to incorporate under a B-Corp (Benefit Corp) structure rather than as a C-Corp. The way that a companies structures itself can have significant implications on its corporate governance. …show more content…
First all, B-Corps allow a company to continue the values even after the owner of the company changes or passes away. For example, Yvon Chouinard, Patagonia’s founder, added that “B. corp will allow the values of my company to continue, even after it’s sold and it’s way down the line and we’re dead.” This is due to the reason that in order to become a B-Corp, an organization must meet the legal requirement for B-Lab certification, essentially baking in sustainability into the DNA of the company and ensuring the mission survives. Companies are rated on a scale from 0 to 200 and companies that achieve a score of 80 or more “pass”, receiving the certification based not just on products but also on the overall production process and sourcing. New management is legally required, to maintain the standards of being incorporated as a B-Corp, to continue the social impact an organization has. B corporations are assessed annually by an independent benefit director to make sure that the organization acts in-line with their obligation to create general benefit …show more content…
For example, PA-based footwear company Dansko become a B-Corp as a cost-effective way to measure its environmental footprint. Dansko was able to take advantage of the B-Corp certification process to review their social impact on the community and product usage, creating benchmark models and templates for evaluation. As a result, the company were able to root out any excess waste and operations inefficiencies they faced. Cabot similarly used their certification as a B-Corp to create the Real Farm Power project, an effort to use partnerships to deliever renewable energy more efficiently. After three years, the plant utilized priority motion sensors to generate enough electricity to churn butter. The project not only saved significant electricity costs for Cabot but also gave the firm recognition for the efforts through the 2016 U.S Dairy Sustinability Award for Outstanding Dairy Processing & Manufacturing Sustainability, a strong testament to Cabot’s commitment to social
Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to
Tomasic, R. Jackson, J. & Woellner, R. (2002). Corporations Law: Principles, Policy and Process. 4th ed. Sydney: Butterworths
“Corporations are said to be “creatures of statute;” they exist because state laws allow human beings to organize themselves into entities that separate ownership and management functions as the outline above delineates. The business rule is there a presumption that making a business decision, the offices act in good faith with the belief that their actions is what is best for the company (Halbert/Ingulli, 2012 pg. 31).”
Phenomenal growth of interest in corporate governance has emerged in recent years. The body of literature on the subject has grown markedly in response to successive waves of large corporate failures. Furthermore, there have been numerous attempts to define what constitutes ‘good corporate governance’ and to provide guidelines in order to enhance the quality of corporate governance.
Ever since the outset of the industrial revolution, corporations have been an inherent constituent in American society. However, due to this heavy influence, corporations have ever since created a struggle with individuals for social, political, and economic power. At present, this issue is only being addressed at the economic level. Presidential candidates such as Donald Trump and Hillary Clinton are putting a considerable amount of attention towards corporate taxes but are neglecting the legal aspects of corporate personhood. The main issue besetting the United States as a whole, is legal reform among corporations because it is affecting the political values, freedoms, and security of the American people.
In my review of A Primer on Corporate Governance by Cornelis A. de Kluyver I intend to examine, evaluate, and break down his key points. The book provides a general view on how corporations govern themselves, and the internal and external forces that effect and constrain them. The biggest external force is of course the US Government and the variety of laws and regulations imposed upon corporations. Internally, they are managed by the CEO and board of directors along with a set group of committees and corporate guidelines.
The corporation is a complex set of contracts, and corporate law enables the participants to select the optimal arrangement for the many different sets of risks and opportunities that are available in a large economy. No one set of terms will be best for all; hence the "enabling" structure of corporate law.
The success of a company will depend on the principles of moral and ethical behaviors in society. Social media platforms such as Facebook, Twitter, and Reddit are making it more difficult for companies to get away with unethical behavior. In the future companies that will remain profitable have to look at putting profit on equal levels with people and social responsibility. Benefit Corporation (B Corporation) is a corporate form designed specifically for that kind of entities. It encourages innovative ways to bring humanity back into business and redefine what it means to be successful (Lam,
This was a very interesting article, in my opinion it brings to mind the derived phrase, which came first the chicken or the egg. Meaning, is corporate governance an attempt to control the results of unethical practices of corporations or is it meant to deter them. In reading this article, it is clear that certain corporations practiced unethical business behaviors for self-interest, but the questions this author have are: 1. Should corporate governance be regulated by the legislature as well as the organization and to what degree, 2. Is corporate governance, there to protect the shareholder or the stakeholder, 3. How effective is corporate governance on a global level. The need for a governance system is based on the assumption that the separation between the owners of a company and its management provides self-interest executives the opportunity to take actions that benefit themselves, with the cost of these actions borne by the owners (Larcker & Tayan, 2008).
Certified B-Corporations are much more closely related to the Stakeholder Model rather than the Economic Model. In the Economic Model, the main goal is to maximize profits for shareholders. Executives have the option to contribute to society, however, this option is only considered if it is in the best interest of the companies’ shareholders. In the Stakeholder Model, the main objective is to benefit a wide range of people. Through this model, managers have a responsibility to everyone who is interested in the success or failure of the company. They are responsible for much more than just the stockholders. As a manager in the Stakeholder Model, you have an obligation to maximize profits without causing harm. This makes the Stakeholder Model
The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.
There is no clear framework of the rules that would cover the contingencies of a ruling to pierce the corporate veil Idoport Pty Ltd v National Australia Bank Ltd. The corporate Veil usually protects owners and shareholders from being held liable for corporate duties. Yet again a decision made by the court to lift that veil and would place the liability on shareholders, owners, administrators, executives and officers of the company without ownership interest. The purpose of this essay is to conduct an analysis on the concept of lifting the corporate veil and to review the different views on its fairness and equitability to present a better understanding of the notion, the methods used was throughout researching the numerous scholars views on the subject, case law and statutes examples, and the evidence provided by the empirical study of Ramsay & Noakes. When we discuss the lifting the corporate veil the first case that pops out is the case of Salomon V A. Salomon & Co Ltd, since the decisions of applying the corporate veil were first formed as a consequence of this case. The idea covers all of company law and distinguishes that a company is a separate legal entity from its members and directors. Furthermore, spencer (2012); have indicated that one of the core principles that followed the decision in Salomon v Salomon was the wide acceptance one man company’s. However In order to form a
Corporate governance refers to ‘the ways suppliers of finance to corporations assure themselves of getting return on their investment’ (Shleifer and Vishny, 1997: 736). Corporate governance discusses the set of systems, principles and processes by which a
Corporate governance is founded on laws, policies, processes, systems and behaviours and together they provide a system for the way in which an organisation is directed, administered and controlled. As such, the Charity Commission, (the ‘Commission’) recognises that to deliver its strategic aims, objectives and priorities successfully, it needs sound corporate governance arrangements in place, (Charity Commission UK). Corporate Governance is not - or should not be - about debate and discussion on executive compensation, shareholder protection, legislation and so on. In recent times, corporate governance became not only a subject of fierce debate and public outcry, but also, as a result of this and arising legislation, a subject which been wearisome for many company directors. The hidden gem here is to a great
As explained by Schelker (2013), the agency problem between the owners and the management of a firm is at the heart of the corporate governance literature. Hence, there is a need for a