Maryland has created a new legal structure—called a benefit corporation for companies that blend business with social and environmental good.
The legislation, signed into law by Gov. Martin O'Malley, requires that benefit corporations create a positive impact on society and that boards of directors consider how decisions will affect employees, local jurisdictions, and the environment, rather than just looking at shareholders' interests. It also offers board members legal protection for taking social and environmental issues into consideration.
"For the first time, we have a market-based solution supporting investors and entrepreneurs who want to make money and make a difference," Andrew Kassoy said in a written statement. Mr. Kassoy is co-founder of B Lab, a nonprofit organization in Berwyn, Pa., that runs a certification program for socially responsible businesses.
The new law tackles a major concern of entrepreneurs who need to raise money to expand their social-purpose businesses but fear losing control of the companies' social or environmental mission.
A similar bill has passed in Vermont's Senate and will soon be considered in the assembly.