Certified B Corps Are Only Halfway Done

steve-piersanti-started-berrett-koehlerSteven Piersanti founded Berrett Koehler Publishers 24 years ago, shortly after he was fired. Piersanti, an executive at Jossey Bass, refused an order from the company’s new owner, billionaire investor Robert Maxwell, to lay off eight valued employees. He was fired for insubordination.

After the news got around, Piersanti was deluged with offers of support from authors, suppliers, and investors who were also dismayed by Maxwell’s emphasis on maximizing short-term profits at the expense of everything else. Piersanti started Berrett Koehler (BK) to represent the interests of all stakeholders in the publishing process. Today the company has a large catalog of books (including one of mine) on progressive business practices and work/life issues.

Four years ago, BK hired B Labs to audit over 280 of its social, environmental, and employment practices. BK wanted to demonstrate that it met a high standard for corporate citizenship and was creating social benefits as well as profits. When it passed the audit, BK became one of over 1,450 “certified B Corps” which are audited every two years. But that wasn’t enough for Piersanti.

On October 21, BK also changed its California corporate charter to become a benefit corporation. BK’s articles of incorporation now require directors to balance the interests of employees, customers, and other stakeholders with those of shareholders in all company decisions. BK and other benefit corporations must produce a public benefit as well as profits, and they must also report to the public on exactly how those benefits are being produced.

“The audit and the chartering need to work hand in hand,” says Piersanti. “Neither one is sufficient if you’re really committed to running a business that also pursues social goals.

“The B Labs audit is rigorous, but it is also voluntary. You could pass the audit in October, elect new leadership in November, and abandon all the policies that made you a certified B Corp in December. On the other hand, becoming a chartered benefit corporation creates legal obligations that are far more likely to survive hard times or changes in leadership. But those obligations are vague, and there’s no penalty if you don’t meet them.

“If you’re a chartered benefit corporation but you don’t undergo the audit, you could say in your papers that handing out free guns to everyone is your public benefit. If you take the audit, you can’t get away with that. The audit is the state of the art, and the charter means you’re not going back, but you have to do them both or it won’t really work.”

Piersanti, who is 62, says he had an eye on his own legacy when he took BK through the two-part process. “Succession planning is important to any business,” he says. “But if your business has a mission, you need to be concerned with more than finding the right people for the right positions. You also need to pay attention to the institution and how it’s structured, or else the mission won’t survive you.”