Stakeholder Governance

Operating under a doctrine known as shareholder primacy, companies are able to prioritize profits — even when those profits are derived from behaviors that create inequality, environmental damage, and social fragmentation. 

The failure of shareholder primacy is increasingly acknowledged by business and finance leaders around the world. Many are now calling for a shift to corporate governance that prioritizes all stakeholders, commonly known as stakeholder governance or benefit governance. This kind of corporate governance ensures that companies are required to consider the interest of all of their stakeholders — customers, workers, suppliers, communities, investors, and the environment — in their decision making. Put simply: stakeholder governance ensures we have better businesses that are accountable to people and planet. 

In 2010, thanks to B Lab’s advocacy, the first benefit corporation law in the United States was passed in the state of Maryland. Today, 51 jurisdictions around the world including Italy, Colombia, France, Peru, Rwanda, Uruguay, Ecuador, British Columbia, and Canada, as well as 44 U.S. states, Puerto Rico, and the District of Columbia (Washington, D.C.) have stakeholder governance statutes. The statutes differ based on the degree of stakeholder consideration required. Some demand the triple bottom line of people, planet, and profit; others require a double bottom line of purpose and profit. 

In other jurisdictions where enabling legislation is not needed, or where other corporate governance legal frameworks are in place, B Lab and Sistema B advocate for companies to adopt stakeholder governance commitments within company constitutions, articles of incorporation, and other formation documents, in order to embed the same structures that feature in benefit corporation laws.  

Certified B Corporations and benefit corporations are often confused. Our non-profit, B Lab, administers B Corp Certification to companies who meet verified standards of social and environmental impact through the B Impact Assessment, commit to transparency requirements related to their business’ impact and operations, and commit to being legally accountable to all of their stakeholders. One way for B Corps to fulfill the legal accountability requirement of the certification is to become a benefit corporation. 

Benefit corporation is a legal structure that embeds stakeholder governance into a business’ DNA, ensuring the business considers its impact on all of its stakeholders. Importantly, the benefit corporation structure is not a certification and benefit corporations are not required to meet B Lab’s standards.