Texas continues to be a destination for corporations across the country and the world. While our state has aggressively pursued and passed business-friendly legislation, we are behind on one trend: Public Benefit Corporations ("B-Corps").
B-Corps is a purely voluntary status through which a company is incorporated to pursue a public benefit or social good AND profits. It expands the obligations of a company’s board of directors by requiring them to balance benefits to the public with the financial interests of shareholders. This gives directors the legal protection to pursue a social purpose mission and not just profits.
Thirty-one states have already passed B-Corps legislation, including Delaware, California, Florida and New York. I have filed House Bill 3488 that would serve as enabling legislation for the creation of B-Corps here in Texas.
Several high-profile companies, such as Patagonia, Kickstarter and This American Life, have formed as B-Corps. One of Kickstarter’s social purposes is, for example, “to create tools and resources that help people bring their creative projects to life, and that connect people around creative projects and the creative process.” Kickstarter formed as a Public Benefit Corporation in 2015 and has already experienced notable returns. In a recent report, Kickstarter announced that the most noticeable change since it became a B-Corp has been the significant increase in people applying to work there.
There is a trend among millennials to work for and buy from companies that pursue greater societal good in their business models. Additionally, after speaking with many advocates on this issue, I have learned about the growing interest among venture capitalists to invest in B-Corps.
Under current Texas law, Public Benefit Corporations have to be incorporated in other states that offer this option. This arrangement leads to an increased cost of doing business in Texas, as it requires increased fees and increased potential for litigation to occur outside of the state. That’s less than ideal.
At a time when a constrained state budget will undoubtedly leave many needs within our communities unmet, Texas should — at minimum — facilitate opportunities for private investment in the greater good. Legislation enabling B-Corps this session would help the private sector invest in the growing needs of our state now, while simultaneously meeting today's dynamic market demands. It’s a "win-win" for business and communities and a solid a win for Texas.