Posted 5 years ago on Jan. 26, 2012, 4:16 p.m. EST by darrenlobo
This content is user submitted and not an official statement
The Wall Street Journal reports that in seven states companies can register as benefit corporations, allowing the firms to pursue social and environmental goals without the worry of shareholders suing them for not maximizing shareholder value.
The idea at the root of benefit corporations is that profit should be abolished. But the results of that would be disastrous. Mises points out that if profits were given to the customers (or, in other words, if prices could not exceed costs), this maximum-price decree would paralyze markets and require goods to be rationed.
For instance, environmentally conscious CEOs can try explaining to shareholders that using more expensive materials or processes to create goods is beneficial to the earth and thus more worthy than using less environmentally friendly but less expensive materials and earning a higher profit, but the net benefit is impossible to measure. The CEO and board are merely asking shareholders to subsidize their worldview.
A free society cannot survive without entrepreneurial action as well as entrepreneurial profit and loss. Entrepreneurs adopting benefit corporation charters may be well-intentioned, but they should heed the words of Mises:
The elimination of profit, whatever methods may be resorted to for its execution, must transform society into a senseless jumble. It would create poverty for all.