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California Benefit Corporations

Corporate officers and directors have a fiduciary obligation to act in good faith, use their best judgment, and act in the best interests of the corporation and its shareholders. These restrictions systemically drive corporate behavior towards measurable, objective results, usually as increases to the bottom line. Otherwise, the officers and directors may risk liability from a real or perceived breach of their fiduciary
duties. The Corporate Flexibility Act of 2011 allows socially minded entrepreneurs to include social welfare and environmental objectives in their company's mission. It broadens the acceptable criteria for corporate governance. The Act was amended in 2014 to require directors to pursue these non-economic goals as part of their fiduciary duty (rather than merely permitting such consideration previously). Directors therefore have additional protections from liability when pursuing socially beneficial goals. There are greater compliance requirements in exchange for the legal protections. Appropriate planning, however, can mitigate the reporting burden and allow a corporation to gain significant flexibility among profits, social and economic goals.

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