Public Benefit Corporation
What are Public Benefit Corporations (PBC)? How do they differ than traditional for-profit corporate structures? What's the difference between a PBC and B-Corp?
This is not legal advice, we aren't lawyers.
What Is a Public Benefit Corporation?
A Public Benefit Corporation or PBC is a for-profit legal structure available in many U.S. states that allows a company to pursue both financial returns and a specific public benefit. In simple terms, a PBC is a hybrid between a traditional for-profit company and a nonprofit. It makes money like any other business, but it also commits to having a positive impact on society, the environment, or both.
This dual mission is baked into the company’s DNA. When you register as a PBC, you must declare a specific public benefit in your formation documents. That declared purpose becomes a guiding light for the business and a benchmark against which its decisions and progress can be measured.
Under Delaware law, one of the most popular jurisdictions for business incorporation, a PBC must identify one or more specific public benefits in its certificate of incorporation and must operate in a responsible and sustainable manner. The board of directors is required to balance the pecuniary interests of stockholders, the best interests of those materially affected by the corporation’s conduct, and the public benefit(s) identified in the company’s charter. Delaware also requires PBCs to provide shareholders with a statement every two years that assesses how the company is meeting its public benefit objectives.
What Kinds of Purposes Can PBEs Be Incorporated For?
The scope of purposes a PBC can pursue is wide-ranging, and companies typically tailor this to their values, vision, and industry. Common examples include:
- AI Innovation: Advancing AI technologies in ways that are safe, transparent, and aligned with the public interest, ensuring responsible deployment, mitigating risks, and promoting broad societal benefit.
- Environmental Sustainability: Reducing greenhouse gas emissions, promoting renewable energy, conserving natural resources.
- Social Equity: Supporting underserved or marginalized communities, advancing diversity and inclusion in hiring and leadership.
- Health and Wellness: Improving access to healthcare, mental health support, or healthy food.
- Education and Access: Expanding access to quality education or digital tools in underserved regions.
- Ethical Supply Chains: Promoting fair trade practices and ensuring ethical sourcing of materials.
- Community Development: Revitalizing local communities, investing in affordable housing, or creating local employment opportunities.
You can choose one or more purposes based on the kind of impact you want to create. This purpose then becomes part of the company’s identity, governance, and obligations.
Key Differences Comparing Traditional For-Profit Corporations
| Key Differences | Traditional Corporations | Public Benefit Corporations |
|---|---|---|
| Primary Purpose | Maximize shareholder value | Pursue profit and a specifc public benefit |
| Legal Obligations | Fiduciary duty to shareholders only | Fiduciary duty to shareholders, public benefit and all stakeholders involved |
| Accountability | Focused on financial performance at all costs | Must balance profit with social and/or environmental mission |
| Transparency | No formal impact reporting required | Must produce regular benefit reports (Delaware requires biennial reports to shareholders) |
| Legal Protection for Purpose | Leaders liable to maximize shareholder value and prioritizing impact may bring personal liability risk and/or challenged | Leaders are protected when balancing purpose and profit |
| Public Messaging | Mission-driven branding optional | Mission is legally embedded and disclosed |
Public Benefit Corporation (PBC) vs. B-Corp
Patagonia created a great outline of the differences here.