Boardroom Governance with Evan Epstein

Frederick Alexander: Benefit Corporations, B-Corps and the Shareholder Commons.

Episode Summary

In this episode, I talk with Rick Alexander, the founding partner and CEO of the Shareholder Commons, an independent nonprofit founded in 2019 that addresses systemic issues and structures that hinder a just and sustainable economy. Rick practiced corporate law for 26 years with Morris Nichols, a leading Delaware corporate law firm, including four years as managing partner. In 2015, Rick became Head of Legal Policy at B Lab, where he worked to create sustainable corporate governance structures around the globe. He left that position in 2019 to develop the concepts behind the Shareholder Commons as a B Lab Fellow. If you like this show, please consider subscribing, leaving a review or sharing this podcast with colleagues or friends. You can also subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com

Episode Notes

  1. Start of interview [1:38]
  2. Rick's "origin story" [1:55]
  3. His "traditional" corporate law practice for 25 years with Morris Nichols in Delaware ("the core of our advice followed two simple rules: shareholders get to elect the directors, and directors run the company for the benefit of those shareholders... all the rest is commentary") [3:45]
  4. How his focus changed in 2010 with B Lab's effort to push legislation in DE on benefit corporations [5:45]
  5. How B Lab's benefit corporations proposal differed from "constituency statutes" [07:50]
  6. Three sets of cases worth thinking about: 1) Pre-constituency statutes (shareholder primacy); 2) Constituency statutes ("it's a may, not a shall"); 3) Benefit corporations (only one case has been filed, in Virginia, and it quickly settled)  [10:41]
  7. The first benefit corporation statute was enacted in Maryland in 2010 [12:59]
  8. B Lab's push in Delaware, and how Rick joined B Lab. Some influence from Lynn Stout's "The Shareholder Value Myth."  [13:50]
  9. Although originally shunned by VCs, public benefit corporations incorporated in Delaware have raised ~$2.5bn between 2013 and 2019 per a recent study (based on 275 early-stage financings). Per Rick, total US fundraising by benefit corporations is in the order of $4 billion. [15:54]
  10. Evolution of legal structures for benefit corporations, expanding the BJR: B Lab's proposed MBCL, PBCs in Delaware, ABA version, British Columbia, etc.) [17:55]
  11. Accounting for social value "what gets measured, gets managed": SASB (sustainability metrics), GRI Standards, B Impact Assessment (score and certification). Pressure on the SEC and EU's metrics [26:16]
  12. Distinguishing benefit corporations (generic term, ~10,000 companies around the world), public benefit corporations (Delaware form, ~2,000 companies) and B-corps (certification by B Lab, ~3,500 internationally, of which only ~300 are benefit corporations). Danone's conversion to "Entreprise à Mission." [29:57]
  13. Traditional VC investors are investing in benefit corporations (not only impact investors) [34:20]
  14. Benefit corporations in public markets (3 IPOs, 3 conversions): Laureate Education (2017), Lemonade (2020), Vital Farms (2020). Brazil's Natura (certified B Corp) acquisition of Avon (2019), Danone and Amalgamated Bank  [36:22]
  15. How does Rick respond to criticism of the benefit corporation model and the need to get support from institutional investors to succeed [40:43]
  16. How to reconcile the current debate of the purpose of the corporation, plus ESG trends, with the benefit corporation movement [45:51]
  17. The focus of Rick's new project The Shareholder Commons (2019), with initial funding from the Ford Foundation. "We want to change the paradigm for institutional investors (through advocacy, guardrails, policy and litigation)" [50:03]
  18. His book "Benefit Corporation Law & Governance: Pursuing Profit with Purpose." (2017) [56:41]
  19. His favorite books: [58:36]
    1. The Mind's I (Douglas Hofstadter and Daniel C. Dennett)
    2. Wherever You Go, There You Are (Jon Kabat-Zinn)
    3. Morality, Competition and the Firm (Joseph Heath)
  20. His mentors: [01:01:07]
    1. John Johnston (Former partner at Morris Nichols)
    2. Lewis Black (Former partner at Morris Nichols)
  21. His favorite quote: [1:02:54]
    1. "No effort is wasted"
    2. "Strategy is what you don't do"

Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License