An ethical hierarchy for companies?
Posted: 14 Oct 2015
To celebrate the launch of the new B Corps in the UK, I’ve been thinking about company structures.
A Corp: Asset Locked Companies: trading not for private gain but for social good. Many Social Enterprises and Charities
B Corp: Benefit Corporations: companies that have a defined mission to do some social good but can also be for private gain.
C Corp: Commercial Corporations: for private gain - some can also benefit society, but it’s not the primary purpose - profit is the primary purpose.
D Corp: Destructive Corporations: actively do harm to people or the environment, and do it for private profit.
E Corp: Evasive Corporations: companies who don’t pay their proper due, or deceive people for private profit
Asset-locked companies exist to add social value in the long term and cannot be sold for private gain. At its best, asset locked companies can create sustainable long-term growth, impact and societal change (A+) The asset lock locks in the mission as well as the value of the company. Most social enterprises and charities have this structure.
However, it’s not all plain sailing. This sector can suffer from a perceived lack of commerciality and a level of inefficiency through duplication. And not all asset locks are created equal – with the lock on some mutuals being a case in point. The Halifax Building Society was a mutual, and had become a very sound savings and loans business, built up over decades by its members into a trusted and respected institution. The lure of private profit rather than member benefit pushed it to a C Corp and then pure greed pushed it to an E Corp
B Corps are a new structure for the UK but have been around for a while in the US. They mission-lock an organisation, but the ownership can be private and they are for private gain as well as social impact. These are yet to be tested in terms of the social value they create and if the mission is truly locked… and in perpetuity. What does private gain mean in terms of real money? Are we back to greenwash or is this truly a way forward?
Good business have been here before - the Quaker firms of old, Cadbury (now Kraft), Clark Shoes and even Barclays had a values driven start to their lives but went way down the hierarchy of ethical business - to E Corp in some cases.
Commercial companies set up to make private profit and to maximise profit to shareholders. A huge number of companies in this category, and a serious amount of innovation has been achieved by the dream of riches, both individual and corporate. Some C Corps are in for the long term and build trusted brands, contribute via CSR to the good of society, pay their taxes and are forces for good. I was thinking of VW when I started writing this as they have an iconic brand, are in the top 10 companies in the world for spend on CSR and are here for the long term. But they have just gone to E Corp status, cheating the public and lying for private gain - to the destruction of their brand.
What would be fantastic is if C Corps chose to move up to B Corps or the Holy Grail, A Corps!!
Destructive corporations do exactly what they say. They are bad for society, for people and/or planet. But they don’t care because they make loads of money. Not much to say about these really, they make ciggies, land mines, things that are just not good. Some of them are very open about what they do, some investors shun them (Socially Responsible Investment) others make good returns out of them. You would not expect them to move up the league table at all, and in fact you would not want them as B Corps or A Corps!!!
Evasive Corporations, I have put these below the D Corp because in a lot of ways they are much worse. People know you make ciggies or bombs and dislike you or your brand because of this. E Corps are something different, and seem to becoming much more prevalent. The alleged tax evaders like Google, Vodafone, Starbucks and Amazon, the payers of slave wages, the VWs, Serco and G4S of this world who cheat and lie. Yet all the time these companies are building a brand which they market as values-led. Barclays and other banks who miss sell, cheat and rig markets whilst pretending to be good, organisations that spend a fortune on CSR because they are so E Corp.
The challenge is to move E Corps to C Corps whilst stopping current C Corp slipping into the mire of E Corp!
F, G and H Corp!!!
What else do we have out there? And is this a fair reflection, albeit tongue in cheek!