When asked about their plans after graduation, many of my students say they want to work for government or non-profits. "That is soooo 20th century," I say. Instead, consider the market alternative!
The growing 21st century wave, I think, is to be part of the for-profit sector, using entrepreneurial skills to create new products and services that make society better. The for-profit sector is sustainable without requiring the benevolence of strangers or the coercion of big brother. Many companies provide meaningful work and desirable social and environmental outcomes, using the price signals within markets to guide resource allocations.
The for-profit sector just got a boost in Virginia with the creation of a new type of business designation—the Benefit Corporation. A Benefit Corp has the legal right—and the obligation—to consider a multitude of stakeholders including workers, suppliers, customers and the community.
The Benefit Corps has a mandate to make profits within the context of the community and envisioned social mission. This is far more attractive for many young people whose moral imaginations have rightly been aroused. Robert Frank has found that many students are willing to accept 30% below market wages in order to work for a company with a strong social or environmental mission.
Benefit corporation laws have been enacted in 7 states (California, Hawaii, Maryland, Virginia, New Jersey, New York, and Vermont) with others in progress. The main advantage is that if a Benefit Corp is sold, the founders are not required to sell to the highest bidder, but can instead sell to the bidder who most closely can carry out the multiple missions. Removed is the fear of minority shareholder law suits.
A related but entirely separate concept is a "Certified" B-Corp. Certification is provided by B Lab, a non-profit organization "dedicated to using the power of business to address the world's most pressing challenges." B Lab ensures that companies that market themselves as green and social are actually living up to that pledge. A recent company to be certified is Patagonia; Yvon Chouinard, the founder, stated that:
"I hope five or ten years from now we'll look back on this day and say this was the start of a revolution, because the existing paradigm isn't working anymore. This is the future."
So far B-Corp companies are a tiny fraction of the market, 532 businesses with combined revenues of $3 billion.
I can hear the cynics, moaning that all this blather about social responsibility is simply a marketing gimmick. I don't doubt that this is so for many companies who want to market themselves as green.
Adam Smith's moral sentiments model helps explain why motives to help society and the environment can be authentic, not calculated. For more on this, read my critique of Friedman's claim that only profits should matter to a firm. Briefly: Friedman's concept relies on a duty-bound manager who puts shareholder interests first. But a duty-bound person cannot turn duty on-and-off. There's the rub. Transformational leadership connects people's morals to their work in an authentic way, not to manipulate but to engage.
And that is why Benefit Corporations (and the B-Corps designation) can help companies clarify and carry out their missions within a capitalist system.