Hybrid Corporations: What Business Are You In?

Nov 18, 2010 4:00 PM ET

Alice Korngold's Blog

The new "it" thing in social enterprise is hybrid corporations. There are B corporations--benefit corporations--whose mandates are to serve the public good and also increase shareholder value. There are also L3Cs, low-profit limited liability corporations with a similar dual purpose. Translation: for-profit companies whose boards and managers are not expected to fully maximize the company's financial value.

Here's my fundamental problem with this: If you're running the company, day in and day out, what is driving you--mission or profits, and how are you inspiring the troops? And if you're sitting on the board, on what basis are you ultimately making critical decisions--mission or profits? Eradicating poverty in Africa, or making profits from the sale of financial services? It should be one or the other. And if you're an equity holder evaluating the performance of your directors and managers, how do you balance the competing purposes--mission or profits? And will all equity holders strike the same balance? In a for-profit, the measures of success are clear; with competing purposes, how will the board know what success looks like?

First, to provide some background, there are at least two ways to become a B company:

For continuation, see Fast Company...http://bit.ly/bH0i5C

Korngold Consulting LLC assists corporations in building fully integrated, high-impact CSR strategies, including leadership development through nonprofit board service.  Korngold Consulting trains and places business executives on nonprofit boards, and consults to nonprofit boards and leaders to strengthen governance for financial and strategic success.