How an Ice Cream Meltdown Sparked a Corporate Revolution

To understand the birth of benefit corporations, you must go back to the year 2000 and the acquisition of Ben & Jerry’s by Unilever.

When Unilever made an offer in 2000 to acquire Ben & Jerry’s for $326 million, the Ben & Jerry’s board found itself in a quandary – it felt handcuffed by its fiduciary duty to maximize shareholder value, even though the co-founders, Ben Cohen and Jerry Greenfield, wanted the company to remain independent.

Sympathy for independence and the co-founders only went so far and the company was sold to Unilever.

To mollify the co-founders and reassure an ardent customer base, Unilever created a novel corporate agreement that allowed Ben & Jerry’s to have its own separate board of directors and, in theory, its autonomy.

That said, the Ben & Jerry’s acquisition exposed a fundamental problem for socially conscious entrepreneurs:  How could they maintain their company’s mission after being acquired and how could boards of directors possess more flexibility in their fiduciary duties?

This demonstrated the need for new legal frameworks that could legally protect a company's social mission, especially as a growing company raised capital to scale or pursued a liquidity event. Public benefit corporations emerged as a solution, allowing companies to explicitly balance profit with social and environmental benefits in their legal charter.

The Birth of Benefit Corporations  

The sale of Ben & Jerry’s and their first-hand experiences in business inspired Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy to create B Lab – the nonprofit that operates B Corp certification – in 2006.

The B Lab co-founders began by developing an assessment to certify companies for their social and environmental impact.  With this accomplished and the B Corp movement growing, they next laid the groundwork to create the legal structure for a public benefit corporation, which requires directors to consider not just shareholders, but also workers, community, and the environment.

A benefit corporation gives a company the legal right to pursue bottom-line outcomes of social and environmental impact alongside financial profitability. It also requires companies to pursue and deliver a “public benefit,” which in most states (40 now have this legislation) requires the company to use a third-party standard to assess its public benefit. Companies are then required to publish an annual benefit report, aka “impact report.” 

In 2010, the initial public benefit corporation was created in Maryland. My company, Oliver Russell, became Idaho’s first benefit corporation in 2015.  There are now more than 15,000 benefit corporations in the U.S. and the basic framework for this legal structure is being adopted by a growing number of countries around the world.  You can take a much deeper dive into the world of benefit corporations in a longer article I published for the social impact reporting platform, Unit of Impact.

And to be clear, as they are often confused:  a benefit corporation is NOT a certified B Corp.  Sometimes companies are both – but they are not one and the same.

As for the 25-year experiment between Unilever and Ben & Jerry’s, it appears to be unwinding as the Dutch conglomerate is preparing to spin out its ice cream businesses. 

And just last week, the "Jerry" of Ben & Jerry’s made news by resigning to protest what he says is Unilever’s practice of of hindering Ben & Jerry’s ability to take public stands on social and political causes, which as anyone in the impact space knows is arguably the most critical pillar of its brand positioning.

In an upcoming issue, we’ll leap into another legal structure that's being increasingly embraced by mission-driven entrepreneurs, the perpetual purpose trust.

Godspeed, friends.

Russ

💬 Think About It

"It's a folk singer's job to comfort disturbed people and to disturb comfortable people." Woody Guthrie

💥 Quick Hits

• Fight back or duck and cover? – Nonprofit leaders face a question of survival with the DEI dilemma. (Chronicle of Philanthropy)
• Jerry jumps overboard – If you'd like to dive deeper on the reasons Ben & Jerry co-founder Jerry Greenfield resigned last week, you can do that here. (National Public Radio)
• We take clouds for granted – A visually engaging and provocative essay by the founder of the Cloud Appreciation Society on the role of clouds and climate. (New York Times gift article)

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