When Life Gives You Lemons, Make Lemonade Or Something Like That
It was a big day on Wall Street today. Lemonade (LMND) rang the NYSE bell and was able to lift about $ 319 million with an initial public offering. Lemonade is a tech-driven tenant and homeowner insurance startup, and the second public benefit company to file for an IPO.
A public utility corporation (PBC) is a new type of business – think of a hybrid of business forms – allowing businesses to have a public utility (as articulated in its charter) in addition to the traditional profit model.
In the USA, legislators in thirty-five states across the country (and the District of Columbia) have adopted some form of innovative legislation on social enterprises, adopting 45 bills, like current social movements.
Even Delaware, a state considered as “pro-management”, Due to its court rulings and statutes, adopted such a form in 2013 – the Public Benefit Corporation (PBC).
Unfortunately, many businesses may find it difficult to adopt this form due to inadequate guidance from Delaware and other states on how managers and directors can balance a company’s profit goal with its goal. of public interest.
Are PBCs, like Lemonade, the new route for an IPO? Maybe they should be.
In my article, The Law of Social Entrepreneurship – Creating Shared Value Through the Prism of Sandra Day O’Connor’s iCivics, I note that social entrepreneurs are faced with legal insecurity and difficulties in capital formation. They have to persuade their potential investors and other audiences that they are indeed credible and run a social enterprise as they claim to be, resulting in inefficiencies in raising capital. There are additional challenges associated with structuring, launching, funding, and advising social enterprises, all of which are covered in my article.
Fortunately there is groups working to develop agreed measures for the assessment, it will always be difficult to measure the value creation and intangible assets of utilities. This is a fair debate on whether these companies can simply be measured by monetary performance or traditional profit creation. They should be evaluated on the basis of their impact on the public, the communities they serve, the services they offer and the various products they create.
However, with the current political climate in this country—in the wake of the COVID-19 pandemic, which triggered social distancing, economic crisis, mass layoffs, time off, inequality and civil unrest–companies are under pressure from institutional investors and other market players to incorporate into their charters a deep obligation to act for the good of society as a whole.
I just wrote a new article on this topic. Do not hesitate to have a look: Times change: when tech workers revolt!
Business responses to the pandemic are having profound effects on employee rights, their role in the companies they serve, and overall economic activity in the United States.
Over the past decades, the Corporate Governance Scholarship neglected the role of employees– “human capital”, and mainly focused on the relationship between managers, managers and shareholders.
There are public calls for a corporate law revolution in the United States, like current social movements, to resist short-termism and achieve long-term value. Technical employees have joined these calls and are revolting in organize, strike and publicly denounce their employers. Tech employees demand that their employers redefine the purpose of the business and seek long-term value while using the stakeholder lens. These developments contribute to a “paradigm shift”In the reflection on talent management and corporate culture.
In 2020, companies finally realized that “shareholder primacy” was not a good business strategy for attracting, engaging and retaining their workforce.
My article discusses the old but ongoing debate on corporate governance theory, of the current dominant shareholder-centered corporate governance To collaborative corporate governance (stakeholder-centered), and the new theory of corporate personality. It answers the question of whether our company law allows directors to take into account the interests of stakeholders.
It offers a pragmatic solution to a centuries-old debate: Should our theory of corporate governance be extended to include the protection of directors (or officers) if they take employee interests into account in decision-making?
Perhaps if SOEs decide to take stakeholder interests into account, then they should formally amend their charters – certificates of incorporation – and more and more importantly, they should be required to disclose additional information and periodically file files with the competent state and federal authorities, such as public utility companies (PBC).
They should be required to disclose to their shareholders and the public information about their various efforts to promote their public interest mission and objective, as well as the results of those efforts. Different states have different reporting requirements for PBCs, which these companies can easily follow.
There are new legislation recently passed by the Delaware House, and, if enacted into law, it will be easier for a traditional company to convert to PBC.
United States. the investor community also wants to understand human capital management. Transparency in the management of human capital is extremely important for business and society. So much so that our regulators, the United States Securities and Exchange Commission (SEC), are now responsible for proposing, drafting and enforcing new disclosure rules.
The SEC should move to a prescriptive approach (a specific job requirement) and require public companies to disclose talent management information.
Such market intervention will alleviate the problem of lack of mandatory reporting and access to information, which also contributes to the systemic problem of lack of diversity among the largest employers in our country.