What Is a Public Benefit Corporation (PBC)?
Simply (and cheekily) put, a public benefit corporation is a corporation that benefits the public.
Also known as a benefit corporation, B-corporation, or PBC, these for-profit companies make and sell clothes, yogurt, sunglasses, AI tools, and many other things. What makes them different from other yogurt and AI merchants is that they balance private profits with public benefit.
And that’s not just empty rhetoric (like the impossible schedules of hustle culture).
For a PBC to incorporate, they must identify a specific public benefit they’re committed to and enshrine it in their corporate charter. That benefit can be social, cultural, environmental, economic, or something else entirely. Once there, it holds power.
Benefit corporation CEOs can spend money on their stated public benefits even if that spending reduces shareholder profits. CEOs of traditional companies would be unlikely to get away with that because they’re beholden to a single bottom line: profit for shareholders.
In contrast, public benefit corporations are allowed to balance people, profit, and the planet, extending benefits to a wider group of stakeholders—employees, suppliers, distributors, the communities they operate in, the larger environment, and of course, their shareholders.
This provides a unique opportunity to expand the definition of “growth.”
PBCs and Growth: Why Public Benefit Corporations Matter
Traditional corporations grow to fulfill one overarching incentive: maximizing short-term profits for shareholders. Also known as “shareholder primacy,” this hallowed creed is upheld by some of the world’s most successful companies.
Although valuable, shareholder primacy has definite limits—especially when applied to social systems. As Paul LeBlanc shows in Broken, putting profits above people and the planet leads to disastrous results. Consider the following:
- Private Prisons: A 2018 Sentencing Project report found that private for-profit prisons in the U.S. incarcerated far more people than the national average—47% versus 9%. Furthermore, to reduce expenses, private prisons hire fewer staff, give less training, and, as a result, experience higher turnout and assault rates.
- For-Profit Universities: The for-profit University of Phoenix (UoP) initially helped working adults gain in-demand jobs through relevant degrees. Then they went public and took on investors who demanded they maximize short-term shareholder profit. Shortly thereafter, educational quality dropped, company culture toxified, and students defaulted on loans at alarming rates.
Prominent CEOs have also started to question the unquestioned goal of maximizing shareholder profits at all costs. In 2019, the Business Roundtable drafted a statement signed by 181 CEOs including heads of JP Morgan Chase & Co., Walmart, Johnson & Johnson, and many others. In it, they all agreed to rethink shareholder primacy, writing:
“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
2019 Business Roundtable
Unfortunately, their lofty rethinking didn’t lead to action when COVID struck the next year, which highlights the benefits of enshrining that statement in your corporate charter.
Public Benefit Corporation Examples
Although it may seem like a new-fangled trend, quite a few household names are public benefit corporations. These include Patagonia, Kickstarter, and Warby Parker.
- Patagonia: In 2012, the outdoor clothing and gear company became a PBC. Their mission is to “save our home planet” by investing 1% of net profits toward environmental issues and other initiatives.
- Kickstarter: In 2015, the crowdfunding platform became a PBC to benefit the public through through supporting arts and culture. They do so by donating 5% of profits to fund arts initiatives and organizations fighting inequality.
- Warby Parker: In 2021, the eyewear company became a PBC to benefit those who can’t afford eyeglasses, eye exams, and screenings. They do so by donating a pair of glasses for every pair customers buy.
One lesser-known yet timely one is Inflection.
- Inflection: In 2023, the AI company became a PBC to benefit “human well-being and productivity.” They do that through robust user feedback and prioritizing user happiness.
Growth Is a Team Sport
For better or worse, most corporations prioritize shareholder profits above everything else. If shareholders earn more in the short term at the expense of other stakeholders in the long term, then they’ve grown the company and done their job.
Public benefit corporations offer a different model for growth—they poke a little hole in the expanding balloon of shareholder primacy, bringing it back down to earth by helping the people and planet it depends on.