You start a company intending it to be a “force for good” by being environmentally or socially responsible. What protects that mission down the line, when new investors gain control?
Nothing in most of Canada. But a new law in British Columbia locks in your intent.
Not only is the legislation unique, so is the story of how it came to be. The first private member’s bill from an opposition MLA ever to pass in the B.C. legislature got its start thanks to a chance encounter at a 2017 Christmas party.
And while it took a lot of hard work from many people to see the idea into law, its instigator says the success is due in large part to good luck.
“In this particular case it sort of fell into place,” said Bernie Geiss, a continuity advisor in North Vancouver who helps business owners plan for when they can no longer run their own companies. “The stars more or less aligned.”
In October 2017 Geiss sent emails to B.C.’s three main political parties seeking support for benefit company legislation that he described as “a new legal framework to support businesses that want to do good in addition to earning profits.”
The idea was to create a law similar to ones already existing in 35 states in the United States of America — but nowhere in Canada or the rest of the Commonwealth — that allow business owners to register a company as a “benefit company.”
Registering “allows business owners to lock in and protect their purpose and mission for the long term, while protecting their right to serve a broad range of stakeholders,” Geiss said.
An owner running a company in a socially and environmentally responsible way would be able to ensure that it would continue to be run that way after they sold it or were otherwise no longer involved. The ability for directors to have goals beyond making a profit would have more legal protection.
Patagonia and Loblaw
Geiss gave the example of the clothing company Patagonia which was registered in 2011 as a benefit company by its founder Yvon Chouinard.
When Chouinard sells or dies, the company will likely end up owned by several shareholders. “He wanted to lock in the mission of the company and to allow the company to operate as a force for good without the risk of being attacked by shareholders who are saying this is not in the shareholders best interest.”
Another example of why such legislation is needed is Loblaw Companies Ltd., Geiss said, where directors wanted to consider providing a living wage for its employees, but shareholders voted it down last year. “Basically Loblaw wanted to do something that was good, and the shareholders basically said ‘no, you can’t do it,’” he said.
“If Loblaw were a benefit company, directors would be allowed and management would be allowed to implement that kind of policy and not be held liable for it, whereas now if they did it they could be held liable by the shareholders.”
Geiss got little response to his emails, then two months later he was at a holiday party that was also attended by Jillian Oliver, press secretary to B.C. Green Party Leader Andrew Weaver. “The host said you’ve got to talk to Bernie because he’s got this idea about benefit company legislation,” he said. “We chatted. She liked it.”
Oliver set up a lunch in Vancouver for Geiss and a couple others to tell Weaver about the idea. Geiss said, “On the spot he said, ‘That makes so much sense. I want to do this. I want to submit this as a private member’s bill.’”
Weaver: ‘I thought, bingo!’
Speaking on the day the Business Corporations Amendment Act (No. 2), 2019 received royal assent, Weaver recalled that it was easy to get behind the idea. “When they told me about what this was, what the goals were, I thought ‘Bingo! This sounds exactly like a thing that we would support.’”
Weaver took the idea to Premier John Horgan whose NDP formed a minority government dependent on the votes of the three Green MLAs for survival. “The NDP liked it too. It fits within their value system too,” Weaver said. “The pitch was not that difficult to John.... These are also his values.”
The bill, worked on by government legislative drafters, makes various amendments to the Business Corporations Act to allow businesses to register as benefit companies and to set reporting requirements for them.
As Weaver explains it, “It’s about recognizing that business has a very important role to play in many of the societal issues and challenges of our time, whether it be environmental issues or whether it be social issues there is a role for business and this enables them to do that.”
It was an opportunity for B.C. to show leadership and he was glad the legislature was able to act on something that came from the small business community, Weaver said.
Finance Minister Carole James said working to pass the bill was an unusual and rewarding experience.
“This was a first from my perspective and looking at history this was a first,” she said, noting that the bill came from the third party and went through a process that only became possible under the minority government.
“I think it shows what people expect us to do as legislators, which is come to the legislature and work together on their behalf,” she said. “If there’s a good idea it shouldn’t matter who the good idea comes from. We should be able to sit down and move those ideas ahead.”
BC Liberal critic for the attorney general Michael Lee raised various questions about the bill during debate, but in the end the legislature voted unanimously to pass it.
Speaking last Wednesday as the legislature finished debate of the bill, Geiss said, “I’m ecstatic. I’m very excited about it.”
He hoped other provinces and the federal government would now follow B.C.’s lead, taking a signal from the unanimous support that the idea is non-partisan. “Maybe it’s not as big a hill to climb as the result of one province adopting it for the other provinces to get their heads around.”
There is appetite for benefit company legislation, including among some very large companies, Geiss said.
“There is a move by corporations who want to change their focus to be more responsible, they want the protection of benefit company legislation so that they can do radical things with the idea that there has to be radical change in order to reverse climate change, in order to deal with the inequity crisis of wealth around the globe.”
He said his own company, Cove Continuity Advisors, an insurance brokerage that has an “impact advisory” division, will register as soon as the regulations and system are in place to make it possible. “We want to be one of the first to do it because we believe it’s a good thing and we also believe we want to take leadership and demonstrate there is value to it.”
Geiss said he’s well aware that good ideas often go nowhere. “If Andrew wasn’t in the position he is, having lunch with him wouldn’t have meant anything. If the partnership between the Greens and the NDP didn’t exist we wouldn’t have had access to legislative drafters.”
In the end it was a “whole bunch of luck” and a lot of effort that got it done, he said.
Read more: BC Politics