B-Corps and the Accountability Paradox

Introduction

Since introduction to the Maryland Legislature in 2010, Public Benefit Corporations (“PBCs”) have been celebrated as a modern attempt to reconcile profit with purpose.  What other corporation has its own month? From Patagonia’s environmental activism to Anthropic’s commitment to the safe development of transformative AI, the PBC label has come to represent ethical business practices in the eyes of many.  States such as Delaware invited companies to shift their corporate purpose beyond profit through PBC adoption or conversion.

Perhaps as a reward, the PBC statutes additionally benefit corporate boards.  Through broad statutory language and subsequent amendments, PBC law has expanded board discretion.  By narrowing regulatory enforcement and easing reporting requirements, the PBC entity and its statute legitimize the limit of fiduciary exposure through the rhetoric of corporate flexibility in the name of the common good.

Codified Purpose, Unchanged Power

In codifying PBCs, legislatures not only expanded fiduciary duties, but also legitimized what directors were already doing under traditional corporate law.  Under the Business Judgment Rule, directors of corporations have long possessed broad discretion to consider social, ethical, or reputational concerns when those choices could plausibly advance long-term shareholder value.

The PBC statute does not so much transform this discretion as validate it, translating the permissive norms of the business judgment rule into statutory language.  By embedding purpose within corporate charters, the law gives boards an explicit legal basis for decisions that balance sustainability, risk management, and profitability—activities they were already undertaking in practice.  Under this view, the PBC framework reflects not just a shift in fiduciary duty, but a legal acknowledgment of managerial discretion—essentially putting into statute what courts had long accepted in practice.

Reduced Reporting Requirements

One would assume PBCs to be held accountable through required benefit reports.  However, these disclosures are often self-published and not mandatory.  As one essay observed, they are “self-promotional marketing tool[s] rather than .. real accountability mechanism[s].”  Still, many companies publish these reports seeking to articulate measurable goals and foster trust with the general public.

The challenge lies not in corporate intent but in legal design.  Without a specific disclosure requirement, even sincere public benefit efforts are difficult to compare or evaluate.  Requiring uniform reporting disclosures or creating voluntary accreditation frameworks would close this credibility gap.

Next Steps?

The next stage in PBC development will likely focus less on growth and more on mechanisms for accountability.  As companies such as Anthropic and Patagonia build their identities around their stated missions—from AI accountability to fighting climate change—investors and regulators are questioning how a “public benefit” can be measured, rather than merely asserted.

If legislatures want to ensure that the PBC form serves the public as well as it protects boards, future reforms could introduce standardized reporting metrics, limited stakeholder standing, or optional third-party verification.  These measures would not constrain innovation, they would legitimize it, providing objective credibility to a form that has thus far relied on self-policing.  The challenge is to preserve the flexibility that made PBCs attractive while building a framework that holds corporate purpose to its promise.

Skeptics warn that as PBCs become more common, accountability may get lost in the gray area of “balancing” interests.  Under Delaware’s PBC statutes, each corporation must adopt a specific public-benefit purpose within its certificate of incorporation, and boards are required to “balance” that mission against stakeholder and shareholder interests.  If nearly any choice can be justified as mission-driven, real oversight becomes difficult.  Still, this flexibility is what keeps the framework viable, giving the law room to adjust as emerging fields like AI force new questions about how business serves the public good.

When Business Shapes Law

The development of PBC law flipped the usual relational relationship between law and business on its side.  Instead of regulation shaping the market, business trends pushed lawmakers to adapt.  Delaware’s 2020 amendments showed this clearly: companies wanted the image and flexibility of being a PBC but not the high bar of supermajority votes or extra liability.  Delaware adjusted, rewriting the statute to meet the needs of the market it hoped to attract.

This dynamic highlights a larger truth about modern governance: when private companies experiment successfully, legislatures often follow.  In this sense, the PBC movement shows not only how the law legitimizes business practice, but how business itself has become a quiet architect of corporate law.  Still, there are not many publicly-traded PBCs today.  Perhaps other shifts in the law may further incentivize widespread adoption of the PBC framework.  Until then, it serves as a useful experiment in aligning corporate structure with social purpose.

Conclusion

Public Benefit Corporations offer management a way to align business with broader social goals.  But perhaps in an effort to entice more companies to make the switch, the current legal framework does more to validate director discretion than to guarantee accountability.  Without clearer reporting standards or enforcement, the PBC remains an important yet incomplete experiment.  Its true functionality will depend on whether its purpose can be measured as clearly as it is proclaimed.

*The views expressed in this article do not represent the views of Santa Clara University.