B-corps for Booksellers? New structure has some obvious and not so obvious advantages
- By Susan Halas
B corps were fast growing in 2009, and have grown another 70% since.
AE readers first learned about B (for benefits) corporations in 2010 when we visited the warehouse facilities of Better World Books of Mishawaka, Indiana. The rapidly expanding high volume bookseller and book-recycler was an early adopter of this hybrid format. Founded in 2002 the company used the “benefits corporation” framework to acquire its inventory at little or no cost and, at the same time - by pledging a portion of its profits to literacy goals - support a larger social agenda. (www.betterworldbooks.com)
Two years ago our readers had mixed reaction to the company and its business practices. Some applauded the effort to do well by doing good. Others were more than a little skeptical of the model, which they saw as a way to undercut traditional booksellers and openly scoffed at the company’s self-laudatory motto “An online bookstore with a soul.”
What most probably did not fully understand at the time was that B corporations are a new and fast growing business structure that might be applicable to other facets of the book trade, both new and antiquarian, and might be worth a closer look.
Now in 2012 the business press is reporting that, with changing times and a changing social agenda, more and more companies are choosing this form of “social entrepreneurship.” An increasing number of states have passed or are passing legislation that not only allows, but supports and encourages, this structure.
On January 19, 2012 the Wall Street Journal took a closer look at these hybrid entities. According the WSJ, a B corporation is a company whose charter allows the board to consider social or environmental objectives ahead of profits. This does not make a B corporation a non-profit entity, nor does it exempt it from taxes. But it does protect the management from investor allegations of not maximizing shareholder value.
The enabling legislation requires the social and environmental goals of a benefits corporation to be laid out in the by-laws and the company must publish an annual report to measure itself against those goals.
The report said there are seven states that presently allow benefits corporations (Maryland, Vermont, New Jersey, Virginia, Hawaii, California and New York); there are four states where legislation is pending (Colorado, North Carolina, Pennsylvania and Michigan).
When the law took effect in California on Jan. 1 of this year, Patagonia, a high profile sportswear and outdoor gear companies (which has long advocated environmental activism) was first in the line to convert to the new corporate structure. (See coverage in the Economist, Jan 5, 2012 www.economist.com/node/21542432)
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B-corps for Booksellers? New structure has some obvious and not so obvious advantages
- By Susan Halas
The B corp is a relatively new business structure.
While some see this as a good thing, others have a different reaction. Charles Elson, who teaches corporate governance at the University of Delaware, is quoted by the WSJ as saying, “If the management makes a bad decision, there’s very little you can do about it as a shareholder,”
The costs to become a B corp are quite moderate. The fee is $30 to incorporate as a benefit corporation, not including the cost of outside lawyers.
Most recent coverage of the trend points out that “benefit corporations” are not to be confused with “B corp certification” which is presently available in all 50 states.
B corp certification can be obtained in any state for fees ranging from $500 to $25,000 annually depending on revenue, according to B Lab, the non-profit Pennsylvania based organization that developed the benefit corporation legislation and oversees the certification process.
B Labs (www.bcorporation.net) counts 517 B corps with $2.9 billion in revenues spread across 60 industries.
The site is quite comprehensive. It offers a great deal of detailed information on the legislation, the structure, the goals and how to get started. It also provides a directory of companies that have already adopted this form. There is even a calendar of events where would-be Bs can mix and mingle in Georgia, NYC, Colorado, San Diego, LA, and Vancouver, to name a few.
What makes this relevant to booksellers is that more and more of them find that they are in head-to-head competition with non-profit organizations like Goodwill Industries at home or Oxfam abroad. These are organizations that acquire inventory through outright donation.
Companies like Better World have used the “social good” model to enable them to similarly acquire books at little or no cost, but to then market them in a for-profit context, provided that some portion of the proceeds go to a larger social agenda.
In the same vein BWB solicits donations of books from libraries and currently has existing relations with over 2,000 institutions in the US, Canada and the UK. These donations are most often received as outright gifts; however the company promises to remit a varying percentage of the proceeds from the sales back to the library and also donates money as well as usable, but not commercially viable, titles to literacy causes.
Practices like these have been very successful for Better World. It not only gives them high visibility and do-good credibility, it removes some of the upfront costs of doing business.
Though most small booksellers probably wouldn’t have the sophisticated software, marketing and PR smarts of Better World, it’s still an idea that lends itself to other bookselling applications.
As a number of firms interviewed by the WSJ noted, that ‘good guy’ designation is more important than you might think.
“You’d be surprised how much people care about these issues,” says the owner of one small New York firm. “It earns points with the customers.”
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