A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.

- Dodge v. Ford Motor Company (Mich. 1919)

The principle that a company is run for the benefit of its shareholders is one that has been enshrined in legal doctrine since 1919, when the Michigan Supreme Court ruled that the Ford Motor Company was not permitted to retain its considerable earnings to reinvest internally, at the expense of dividends owed to its shareholders. In recent years, this formulation has come under attack as researchers blame the goal of ‘shareholder value maximisation’ for a host of ills ranging from the lack of focus on R&D to unemployment. It has been proposed that managers should cease to focus solely on maximising value for shareholders and focus instead on maximising value for all ‘stakeholders’.

Several companies (such as Ben and Jerry’s) have embraced the idea, focusing on the ‘triple bottom line’ : people, profits and the planet. But, how does one define who a stakeholder is, and how does an investor measure how ‘green’ a company actually is? Everything from the latest LCD television to eggs in the supermarket are labelled ‘organic’, ‘sustainable’, ‘green’, ‘environmentally friendly’, and unless one is disposed to spend a few hours investigating the small print, neither investors nor consumers can differentiate between a myriad of available options.

The benefit corporation (B-Corp) certification introduced in 2006 attempts to enumerate stakeholders, clarify best practices in how they are treated, and rates company performance on a series of indicators including treatment of employees, environmental-friendliness and community-friendliness.

NYT’s Fixes this week covers the rise of the B-Corp in detail. An interesting read, and here’s hoping that listed companies start looking to obtain B-Corp credentials as well.