Maryland First State in the Union to create Benefit Corporation Legislation

Maryland Governor Martin O’Malley signed into law the nation’s first legislation creating Benefit Corporations, a new class of corporations required to create benefit for society as well as shareholders.

Unlike traditional corporations, Benefit Corporations must by law create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards.

The legislation, sponsored by Senators Jamie Raskin and Brian Frosh and Delegate Brian Feldman, passed the Maryland Senate with a vote of 44 – 0 and the Assembly 135 – 5.

“Milton Friedman would have loved this,” said Andrew Kassoy, co-founder of B Lab, the non-profit that drafted the model legislation with William H. Clark, Jr., partner in the Corporate & Securities Practice Group of Drinker Biddle and Reath.   “For the first time, we have a market-based solution supporting investors and entrepreneurs who want to make money and make a difference,” Kassoy added.

The new law addresses a long time concern among entrepreneurs who need to raise growth capital but fear losing control of the social or environmental mission of their business. These entrepreneurs and other shareholders of Benefit Corporations now have additional rights to hold directors accountable for failure to create a material positive impact on society or to consider the impact of decisions on employees, community, and the environment.

From a company’s point of view, the new law empowers directors of Benefit Corporations to consider employees, community and the environment in addition to shareholder value when they make operating and liquidity decisions. And, it offers them legal protection for those considerations.

“Today marks an inflection point in the evolution of capitalism,” said B Lab co-founder Jay Coen Gilbert.  ”With public trust in business at an all-time low, this represents the first systemic response to the underlying problems that created the financial crisis — protecting companies from the pressures of short-termism while creating benefit for shareholders and society over the long-haul.”

“This is a great moment in the evolution of commercial life in Maryland and America,” said Senator Raskin.  ”We are giving companies a way to do good and do well at the same time.  The benefit corporations will tie public and private purposes together.”

Maryland is the first state to pass Benefit Corporation legislation, but others are quickly following Maryland’s lead.  Vermont Bill S.263, co-sponsored by Senators Hinda Miller and Peter Shumlin, has already passed the Senate and will be considered by the Vermont Assembly over the next 30 days.  Other states considering the legislation include Colorado, New York, North Carolina, Oregon, Pennsylvania, and Washington.

Countries around the world are beginning to apply the science of well-being to the decisions they make. News from the 5th International Conference on Gross National Happiness.

The study of happiness is experiencing a boom. Its practitioners include economists who believe that gross domestic product (GDP) is too limited a tool to measure the success of societies, psychologists and sociologists who feel that their disciplines have focused too much on neuroses and social problems and not enough on determining what kind of activities and policies actually contribute to happier societies, and political leaders who want to know how to make use of their findings.

During the 5th International Gross National Happiness Conference, held last week in Brazil, happiness proponents from around the world were able to come together and compare notes about the practical application of “happiness science.”

The Science of Happiness

Not surprisingly, that science has found that beyond a certain minimum level of income, greater happiness comes from strong and plentiful human connections, a sense of control over one’s life and employment, meaningful work, good health, basic economic security, trust in others and in government, and other factors less directly connected with monetary remuneration.

I was invited to the conference to speak about the connection between work (or overwork), health, and happiness. I made the case that shorter working hours are crucial to happiness, health, and long-term sustainability. The United States, with among the longest working hours in the industrial world, scores far below northern European nations in calculations of leisure time, longevity, and overall health, while having an ecological footprint nearly twice as large—facts which are clearly related.

Studies of life satisfaction can now compare regular polling data from many countries, making it easier to understand how economic and policy decisions impact national happiness. In recent years, such polls have consistently found that the highest levels of satisfaction are found in Denmark, Finland, the Netherlands, and Sweden—countries with a strong sense of social solidarity and attention to work-life balance, small income gaps, high taxation rates, and strong social safety nets.

These studies also find that many relatively income-poor nations, such as Costa Rica and Colombia, also have high rates of life satisfaction, leading one group of British researchers to establish a “Happy Planet Index,” which compares life satisfaction scores, life expectancies, and ecological footprints to produce a net rating for happiness. Many so-called developing countries actually rank at the top of their index.

Gross National Happiness

One country that takes happiness very seriously is Bhutan, the small Himalayan kingdom that hosted the first Gross National Happiness Conference. In 1972, Bhutan’s king proclaimed in 1972 that “Gross National Happiness is more important then Gross National Product.”

Land of the Thunder Dragon
JenFu Cheng’s photo essay of Bhutan

Since then, Bhutan has enshrined the concept in its constitution and looked for ways to apply it and measure it. Karma Ura, the Bhutanese director of the Center for Bhutan Studies and a speaker at the conference, explained that, over time, the Bhutanese have identified nine aspects that factor into analyses of happiness. They include:  psychological well-being; good health; time use (work-life balance); community vitality; education; cultural preservation; environmental protection; good governance; and financial security.

They have developed questionnaires, used in regular polls of the Bhutanese people, by which they assess life satisfaction in each of these areas. Included are such questions as: How safe do you feel from human harm? Rarely? Usually? Always?

Bhutan then uses the results of its questionnaires to guide public policy. Each governmental decision is based on assurance that it will not lower—and should in fact raise—overall life satisfaction. One such analysis led Bhutan’s government to decide not to join the World Trade Organization.

Bhutan’s research, frameworks, and results can be found at its excellent website. While the country is among the world’s poorest materially, the Bhutanese have quite a high level of Gross National Happiness, especially in the countryside, and especially when compared to the resources they consume.

Redefining Progress

Bhutan is far from the only country where happiness has become a serious topic of conversation. This fall, French President Nicolas Sarkozy, only two years ago the champion of economic growth and American-style economics, made headlines by singing a very different tune: he organized a commission led by Nobel Prize economists Joseph Stiglitz and Amartya Sen to re-examine how France measures progress. The commission called for a focus on indicators such as health, family cohesion, and leisure time instead of the current emphasis on GDP. Sarkozy embraced their recommendations and suggested they be adopted by the European community.

In August, a European Union commission released a report called “GDP and Beyond: Measuring Progress in a Changing World.” It recommends more accurate reporting on economic inequality as well as the development of social and environmental indicators—including a comprehensive measurement of environmental stewardship that would consider water and air pollution, climate change and energy use, biodiversity, waste, and resource use.

John Hall, leader of the Global Project on Measuring the Progress of Societies—a project of the Organization for Economic Cooperation and Development (OECD), ratified by 30 countries—reported that the OECD is developing a whole new set of indicators on which to judge the progress of member countries. Its new “Global Project” aims at collecting so-called “best practices”—social and economic policies that are clearly shown to increase life satisfaction.

In October, the 3rd OECD World Forum in Busan, South Korea brought together 2,000 researchers and activists from more than 100 countries to consider policies that focus on happiness instead of economic growth.

“It really is a movement now,” Hall declared.

Over 20 years ago, Dr. Paul Farmer graduated from Harvard Medical School, and promptly moved into a local church with his wife and daughter. The reason? He wanted to reduce his expenses so he could treat the homeless in Boston for free.

Watch how this man systematically has changed the medical profession through his Partners in Health, by focusing on one place, Haiti, for over 20 years – and in the process has rekindled what it means to be a doctor for thousands.

A pesticide approved just 18 months ago must be taken off the market because it could be toxic to America’s honey bees, already in steep decline.

In an order issued December 23, 2009, a federal court in New York invalidated the U.S. Environmental Protection Agency’s approval of the pesticide spirotetramat, manufactured by Bayer CropScience and sold under the trade names Movento and Ultor. The court ordered the EPA to reevaluate the chemical.

The order issued by U.S. District Judge Denise Cote goes into effect on January 15, 2010, and makes future sales of Movento illegal in the United States.

The lawsuit was brought by the Natural Resources Defense Council and the Xerces Society for Invertebrate Conservation.

“This sends EPA and Bayer back to the drawing board to reconsider the potential harm to bees caused by this new pesticide,” said NRDC attorney Aaron Colangelo.

“EPA admitted to approving the pesticide illegally, but argued that its violations of the law should have no consequences,” Colangelo said. “The court disagreed and ordered the pesticide to be taken off the market until it has been properly evaluated.”

A honey bee on apple blossoms in New Jersey (Photo by Mullica)

A spokesperson for Bayer expressed disappointment with Judge Cote’s ruling.

“Bayer should not be permitted to run what amounts to an uncontrolled experiment on bees across the country without full consideration of the consequences,” Colangelo said.

The order comes as an alarming multi-year die-off of honey bees has beekeepers fighting for commercial survival and crop growers wondering whether bees will be available to pollinate their crops this coming spring and summer.

In June 2008, the Bush-era EPA approved Movento for nationwide use on hundreds of different crops, including apples, pears, peaches, oranges, tomatoes, grapes, strawberries, almonds, and spinach.

The approval process went forward without the advance notice and opportunity for public comment that is required by federal law and by the EPA’s own regulations.

In her ruling, Judge Cote wrote, “As for the product’s commercial success, if the product merits registration it should survive FIFRA’s [Federal Insecticide, Fungicide and Rodenticide Act] notice and comment period and reexamination by the EPA, and it will return to the market. If it does not, then it should never have been registered and sold.”

The EPA did recognize that spirotetramat could endanger bees by requiring that all end-use products containing the pesticide carry a warning label stating, “This product is potentially toxic to honey bee larvae through residues in pollen and nectar, but not to adult honey bees. Exposure of adult bees to direct treatment or residues on blooming crops can lead to effects on honey bee larvae.”

Even so, argues Colangelo, the EPA “failed to evaluate fully the potential damage to the nation’s already beleaguered bee populations or conduct the required analysis of the pesticide’s economic, environmental, and social costs.”

EPA’s review of Bayer’s scientific studies found that trace residues of Movento brought back to the hive by adult bees could cause “significant mortality” and “massive perturbation” to young honeybees, known as larvae.

Beekeepers and scientists have expressed concern over Movento’s potential impact on beneficial insects such as honey bees.

Bayer said in a 2007 statement introducing the pesticide that spirotetramat is recommended for use in integrated crop protection programs “since it is safe for beneficial insects such as ladybugs and lacewings.” The statement did not mention bees.

According to the U.S. Department of Agriculture, bees pollinate $15 billion worth of crops grown in America. USDA also claims that one out of every three mouthfuls of food in the typical American diet has a connection to bee pollination.

Both honey bees and bumble bees in the United States have suffered steep declines in recent years due to a combination of stressors, including insecticide exposure.

Bayer CropScience says spirotetramat is “a long-acting active ingredient” which protects fruits, grapes, nuts, vegetables and potatoes from pests such as aphids, cicadas, grape louse, mealy bug, whitefly and cottony cushion scale.

“The unique feature of this substance is that the systemic active ingredient moves up and down through the entire plant system, including the young shoots, leaves and roots, and is thus distributed evenly and lastingly. It acts against insect larvae by ingestion,” the company says.

“This case underscores the need for us to re-examine how we evaluate the impact of pesticides and other chemicals in the environment,” said Colangelo. “In approving Movento, EPA identified but ignored potentially serious harms to bees and other pollinators. We are in the midst of a pollinator crisis, with more than a third of our colonies disappearing in recent years. Given how important these creatures are to our food supply, we simply cannot look past these sorts of problems.”

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In the home of eighth-grader Jason O’Neill, teddy bears are everywhere. They’re white, black or brown. Some have bow ties and some have ribbons. They sit on chairs, tables, counter tops and the floor.

Thanks to O’Neill, a young entrepreneur who started his own company at age 9, they’re all going to sick children for Christmas.

“At Christmas I wanted to do something special, so I started a fundraiser this year to raise money for buying a bunch of bears,” O’Neill said.

All of the bears will be given to children at Rady Children’s Hospital in San Diego.

O’Neill has been giving money to charity since he started Pencil Bugs four years ago. The company’s main product is pencils with hand-painted Styrofoam toppers designed to look like bugs. He’s sold hundreds of them in the last four years — and he’s also expanded his product line. His products now include Pencil Bugs T-shirts and greeting cards, and he’s working on a Pencil Bugs board game.

“In the beginning of my business, I knew that I was very fortunate being a kid and being able to do all of this, so I wanted to help other kids in some way,” said O’Neill.

‘Every little bit helps’
This year, O’Neill decided to donate more than money. He wanted to give less fortunate children something tangible for Christmas. He thought of teddy bears.

He began a fund raising campaign, encouraging children across the country to donate. He’s received more than $700 in donations. A group of students from Michigan sent him $119 from a bake sale. Other kids have sent only a few dollars.

“What I always say is that every little bit helps,” O’Neill said. “Those kids that just donate five or 10 dollars out of their own money, that helps and that will change somebody’s life.”

O’Neill and his mom are now busy tying special tags to hundreds of bears, each one thanking children for donating to make the project possible.

O’Neill is still trying to raise money on his Web site to buy more bears before the end of the month, the deadline for holiday donations at the hospital. (Ed note: Maybe NPD readers can help:)

“I haven’t had any big tragedies in my life, but I know that there are always people more and less fortunate that you, so it’s good to help out,” O’Neill said.