How to Get Employee Owned? Part II: B Corp or Benefit Corporation

How to get to employee owned? Part 2. B Corp or Benefit Corporation

As we grapple with rebuilding a new and better economy that is potentially fairer and more equitable, the question of employee ownership has started to come up more often.  There are many ways to get to employee owned.  Before attempting this feat, however, a business owner (or owners) should consider the why and the how.

How to get to employee owned?  Part I:  ESOP

How to get to employee owned?  Part III:  Equity Incentive Compensation

How to get to employee owned?  Part IV:  Cooperatives

Employee Ownership through a Benefit Enterprise.

Another way to create worker ownership is to convert the business into either a B Corp or a benefit corporation.  This approach would allow a company to engage in traditional commercial strategies while attempting to improve the human or environmental condition.  B Corp is a certification — known as “B Certification” — and is done by an independent nonprofit known as B Lab, which evaluates businesses using a point system in four categories: governance, workers, community and environment. Companies that can achieve a minimum score of 80 out of 200 points can certified as a “B Corp” and must undergo recertification every two years.  Another, more permanent option, is for the would-be worker owned business to become a benefit corporation, which a specific entity form that has both a business purpose and a social purpose. Using the benefit corporation approach, the would-be worker owned business would commit in its formation documents to worker ownership and the tenants that accompany this concept

These options can all share a core value: employee welfare. Because of this link, it is logical that companies that are more worker-minded might also be interested in the other aspects of social enterprise.

Take the benefit corporation. For shareholders of privately held benefit corporations, employee shareholders allow a company to protect its particular values by keeping ownership within the organization—which maintains organizational independence. It also prevents the restructuring and layoffs that might come with selling shares to a private equity firm or some other buyer.

A benefit enterprise that has employee shareholders can enhance a benefit enterprises commitment to its employee’s welfare, community development and democratic governance practices

The benefit enterprise itself may benefit from employee’s having and ownership stake by encouraging the company to reach and maintain certain ownership and governance goals that might help draw in talented workers that adhere to the company’s values. In addition, becoming a benefit enterprise can give an organization competitive advantage over non-certified companies by generating positive media exposure, cultivating a loyal customer base, and, in some cases, even commanding a pricing premium for goods and services from more discerning consumers.

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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