Wednesday, January 24, 2024

Incentive alignment in Benefits Corporations

Begun in Maryland in 2012, thirty states now have Public Benefits Corporations (B-corp's) (wikipedia, seeking alpha, quora

  • For-profit companies that can be publicly traded, but which follow other goals, like ESG. 
  • B-corp managers get legal protection from shareholder suits based on low profitability, as they can claim they are pursuing ESG goals.
Chapter one identifies their fatal flaw: not only is ESG hard to measure, but it also conflicts with the pursuit of profit.  This is similar to the problems created by balanced scorecards.

Without good performance metrics,  it is hard for shareholders to tell if B-corp managers are doing a good job, so managers will pursue their own goals at shareholder expense.

Related:  ESG blog posts

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