Is It Only About Profits?

Philadelphia partner Doug Raymond authored an article in Directors & Boards titled “Is It Only About Profit?” The article discusses the Accountable Capitalism Act, recent legislation introduced by Senator Elizabeth Warren, and its implications for corporate governance. The Accountable Capitalism Act imposes benefit corporation principles on all companies in the U.S. with over $1 billion in revenues, requiring business to create a general public benefit, and to consider the effect of a proposed action on all stakeholders who are materially affected—not just the shareholders.

Although the broader “stakeholder” approach reflected in this legislation and in the growing benefit corporation movement has been criticized for its potential effect on board accountability, Doug notes that the Accountable Capitalism Act and the discussion it provokes can serve as a jumping off point for a board to consider and articulate the criteria directors will use in making significant decisions.

Doug recommends that boards should, if challenged, be prepared to explain the criteria they use when making important decisions. This kind of discussion can help prepare the director to make, and to justify, those difficult decisions.