An archetype of a “benefit corporation” has emerged.
Sometimes watching public policy is like a society-wide 4D puzzle, with the fourth dimension being (of course) time.
I remember in 2013 when I had to explain to folks behind the scenes why legislation to create a new type of corporation — the public benefit corporation — belonged on the RI Center for Freedom & Prosperity’s legislative watch list that year. As I succinctly explained in a liveblog of a General Assembly meeting: “Once these corporations are in place, you’ll start to see the legislature manipulating the marketplace to give them an advantage, in general and with respect to government contracts.”
Of course, progressives take their time with these things. Folks like me watched “benefit corporations” sink below the surface of the water as other issues emerged, competing for our attention. Here’s a new sighting of the concept:
Billionaires Reid Hoffman and George Soros are backing a public benefit corporation that will provide funding to new media companies aimed at tackling disinformation online and restoring social trust.
Good Information Inc. launched on Tuesday and is being led by former Democratic strategist Tara McGowan who previously ran a progressive non-profit called ACRONYM, which was backed by LinkedIn founder Hoffman. Others contributing to the multi-million seed effort include investors Ken and Jen Duda, and Incite Ventures.
The ideological cover is paper thin:
In a press release on Oct. 26, Good Information Inc said its aim is to “restore social trust” and “strengthen democracy” by “investing in solutions that counter disinformation and increase the flow of good information online.” …
McGowan’s former progressive non-profit, ACRONYM, ran one of the biggest digital campaigns—costing $100 million—aimed at convincing millions of Americans to vote against Donald Trump in the 2020 elections, Fast Company reports.
One of the companies ACRONYM invested in, called Shadow, produced the vote tabulation app used in the Iowa caucuses and contributed to the delayed reporting of the results following a string of technical issues.
That’s a twofer. The company and its affiliates was essentially an anti-Trump PAC and was directly involved in… let’s say… the oddness of the election and its result. See, that’s a “public benefit.”
On the surface, folks trying to maintain a non-partisan stance might ask, “So what?” Private, for-profit companies can do these things, and benefit corporations are simply private, for-profit companies.
Well, there are a few obvious “so whats.” The first is admitted superficial: The government recognizing a company as providing a “public benefit” affects how people will think of it, and it remains to be proven that opposing viewpoints would be permitted to claim the same mantle. The Rhode Island law (which passed, of course) defines a “general public benefit” as “a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard.” Could conservative billionaires fund a competing de facto PAC along the same lines, or would the “public benefit” be challenged?
A second problem that has become clearer since I first spotted the scheme is that “benefit corporations” state a particular goal as part of their purpose, which makes it legally defensible in opposition to profit. If you invest in a company and it opts to back some political cause that tangibly harms its own profits, you can sue; that’s not true with “benefit corporations.” As an investor, you were warned. So imagine the next Twitter were incorporated in this way and was even more aggressive about pushing a political viewpoint. It could downplay the “benefit” as corporate fluff up until investors wanted to stop the political behavior.
The third problem is the one I highlighted way back when. Sure, Step 1 may be mostly a superficially different category in law for certain companies, but Step 2 or 3 will be special privileges for such corporations. Think of how deeply involved the non-profit Rhode Island Foundation has become in our state’s government and politics. Progressives could open the door to less-burdened (and less transparent) for-profit organizations simply by adding the phrase, “or organized under RIGL chapter 7-5.3,” throughout state law.
To make the potential a little clearer, consider Mark Zuckerberg’s suspicious funding of local elections. It’s not difficult to imagine reasonable governments’ seeing that as a loophole and seeking to close it. It’s also not difficult to imagine a category like “benefit corporations” keeping that loophole wide open.
Featured image by Toa Heftiba on Unsplash.