Three types of corporations that do good by design
Posted: 2013-10-08 11:00:30
The image of corporations as short sighted, oligarchic, profit driven monsters is so common in pop culture that hip companies now address it in their paperwork. Dont be Evil is Googles popular motto, and the growing trend of Corporate Social Responsibility is all about branding a company as a responsible member of society. But even if corporations are people too, it turns out they are only as short sighted, undemocratic and profit driven as people want them to be. Here are three types of corporations that break with tradition and do good because thats how they were designed.
Not for Profits and Charities
Unlike a traditional corporation, a Not-for-Profits goal is not to maximize profits for its shareholders. In fact, an NFP is not allowed to generate profit for its shareholders any profit generated by the corporation must be reinvested in the company itself rather than paid out through dividends. NFPs are used by organizations like churches, schools, activity clubs, and volunteer organizations to set up their companies.
A charity is a type of NFP that enjoys certain rights and privileges. An NFP can apply for charitable status in order to gain tax-exempt status and to issue tax deductible receipts to its donors. A charitable organization cannot generate profit for its shareholders and must reinvest any profits back into its business. In order to obtain for charitable status, the corporation must apply to the Canadian Customs and Revenue Agency (CCRA). The CCRA will only grant charitable status to a corporation whose purposes are charitable. The courts have recognized four general categories of charitable purposes: the relief of poverty, the advancement of education, the advancement of religion, and a catchall benefits the community category.
Perhaps the corporate structure that most undermines the traditional negative connotations associated with corporations is the co-operative model. A co-operative is essentially a corporation run by its members for their own benefit. Many businesses have used this structure to avail themselves of the benefits of incorporation while still maintaining a focus on a certain purpose, rather than simply focusing on maximizing profits. A co-operative must have certain features in order to qualify for registration under the Canada Cooperatives Act:
one member, one vote
limited dividends on membership shares
members provide some capital
distribution of surplus funds to develop the business
There are instances where a for-profit corporation has a social purpose that it wants to pursue while still fulfilling its duty to maximize profits for shareholders. These types of corporations may be able to obtain certification as B (Benefit) Corporations. B Corporations are regulated differently depending on their jurisdiction. Organizations like B Labs have come forward to drive adoption of this style of corporation by offering certification on a global level.
While officers of B-Corps may still find it difficult to justify actions in terms other than benefit to shareholders, this new method of corporate structure sets down tools and measurements to help shift expectations of the company moving forward.
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