1. 2016 Annual Meeting 1

2. Welcome and Introduction
Thank you for attending.
Logistics.
- rest rooms
- agenda
- lunch 2

3. Two questions as we begin:
Why a new bar association?
Why “benefit company” and not “benefit corporation”?
Both questions share a common theme. 3

4. 1. Why a new bar association?
The BCBA has two purposes:
To bring together lawyers who represent clients that are committed to having a positive impact on society and the environment so that those lawyers can together improve the way they advise their clients.
To promote the idea that business can have a more positive impact on society and the environment than it does today.

5. 2. Why “benefit company” and not “benefit corporation”?
Consistent with the purpose of the BCBA to promote the idea that businesses in general can have a more positive impact on society and the environment, benefit “company” has been chosen as a broader term than “corporation.”
We want to create an association in people’s minds with the term “benefit corporation” but we also want to have a broader focus.
We want the benefit corporation model to apply to all forms of business entity.

6. As lawyers, we stand in a special place to influence the future direction of capitalism because the law provides the foundation for the functioning of our economic system.

7. Thus I offer the following thought: The ultimate purpose of the BCBA is to move the development of business law in a direction that protects the basis of our material prosperity while making that prosperity more sustainable, environmentally responsible, and widely shared.

8. Noteworthy Articles That Have Appeared in Just the Last Month8

9. 9

10. “I’m fairly optimistic that this general model is something that could be applicable to a surprisingly large segment of higher education …
Note thirds paragraph. 10

11. 71 Bus. Law (2016). 11

12. Consistent with the private ordering approach that exists in American corporate governance, a new form of corporation has emerged that in a measured way changes the rules of the game to put some teeth behind corporate social responsibility. The so-called Benefit Corporation Model explicitly involves a form of corporation in which boards must operate the corporation in a socially responsible manner. Although this model is conservative in the sense that it does not give other constituencies the right to elect directors or to sue, and limits that to stockholders, the model does, through the use of super-majority requirements and the ability to sue directors for not honoring their legal and equitable duties to act in a socially responsible manner, give corporate managers the ability to take a more long-term approach to corporate investment that better balances the interests of investors in long-term growth and society in business practices that do not externalize costs to workers, the environment, or consumers.
… better balances the interests of investors in long-term growth and society in business practices that do not externalize costs to workers, the environment , or consumers 12

13. Just as investors have been willing to invest in Google with dual class shares protecting the founders’ control or in alternative entities that waive fiduciary duties, there is no reason to believe that investors will not invest in benefit corporations with charters that require them to behave in a socially responsible manner. Many of the emerging generation of entrepreneurs believe that a sustainable approach is not only the right way to do business, but the smart way to make the most profit in the long run. Learning about this new model and deploying it with clients when it seems fitting can be a way for intermediaries to promote a greater focus on long-term growth in our economy. 13

14. The author, Nathaniel B. Davis, is a major in the United States Army and the Director of Defense and Strategic Studies at the United States Military Academy at West Point. 14

15. If we can seek to regulate war in terms of morality, there is no reason such morality cannot be equally applied to the economy, as Walzer indicates. When faced with illegal or immoral orders, it is the duty of professional soldiers to refuse such orders. When such a refusal occurs, it is followed by thorough investigations, and potentially courts-martial or war crimes prosecutions for those who issue such orders. In the case of the former Wells Fargo employees, the opposite occurred. Imagine the moral and societal hazard if the military permitted such retaliation against those who reported illegal and immoral behaviors. The principles of a moral economy would seek to curb the market’s more harmful excesses while preserving its societal benefit. Developing fair and just principles to guide a more moral understanding of capitalism may provide a pathway to a more equitable distribution of income and wealth, one that creates more perfect outcomes for society at large. While the immoral economy has provided advantages to some, it has also stained society and humanity in ways that we are beginning to collectively deem to be unacceptable. The task then is to develop and implement principles of a moral economy which serves the greater good of society.
That task – of developing and implementing the principles of a moral economy – is the task of the BCBA.
Thinking about a moral economy brings us to the last thing I want to say by way of introduction. 15

16. Have we, perhaps, been unfair to Milton Friedman?
In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. - Friedman, “The Social Responsibility of Business is to Increase its Profits,” The New York Times Magazine, September 13, 1970.
We refer to Milton Friedman as a shorthand reference to the things we don’t like about our current system.
Ultimately, I think we are correct in doing that. But consider this statement from Friedman’s classic article about the social responsibility of business.
Both aspects of the basic rules of society are within the mission of the BCBA. Our goal is to change both the law – and also ethical custom.
I am, of course, significantly redefining what ethical custom means. And in a way that is very different from what Friedman was thinking. 16

17. Thank you for joining us today and being part of our effort to create an ethical custom that expects business to be more socially and environmentally responsible.
SO IN CONCLUSION …

18. Report on the Current Status of the B Corp Movement Jay Coen Gilbert Co-founder of B Lab18

19. Report on the B Lab Multinational and Public Markets Initiatives Frederick H. (“Rick”) Alexander Head of Legal Policy, B Lab 19

20. Report on US and International Legislative Developments William H
Report on US and International Legislative Developments William H. Clark, Jr. Drinker Biddle & Reath LLP 20

21. BLUE – triple bottom line – 26 states and DC
TAN – double bottom line – three states and Puerto Rico
GREEN – both – three states 21

22. current global status: legislation enacted22

23. current global status: legislation drafted

24. current global status: legislation being discussed24

25. U.S. Benefit Corporation Adoption: 2010 - 2016
4,000
We estimate there may have been as many as 4,400 benefit corporations as of October 1, 2016.
2,000
‘09
‘10
‘11
‘12
‘13
‘14
‘15
‘16 25

26. Committees 26

27. Legal Issues Involving Specific Types of Businesses Holly Ensign-Barstow Manager of Mission Alignment, B Lab 27

28. Committee on Triple Bottom Line Governance
Committee on Funding and Investment Structures
Committee on Legal Issues (perhaps with subcommittees organized by subject area)
Issues for financial institutions.
Develop outreach to OTC and state banking regulators.
Issues for agricultural coops under Capper Volstead Act.
Issues for insurance companies.
Issues for educational institutions.
Issues for professional practices.
Committee on Publications

29. Keynote Address David Musto Ronald O
Keynote Address David Musto Ronald O. Perelman Professor in Finance Chair of the Finance Department The Wharton School, University of Pennsylvania 29

30. Future Activities 30

31. Possible Dates and Locations for Future Meetings
April 7 or 8, 2017, in New Orleans (same time as ABA Business Law Section Spring Meeting)
week of April 24, 2017, international gathering of B lawyers, Lima, Peru
September 15 or 16, 2017, in Chicago (same time as ABA Business Law Section Annual Meeting)
October 13 or 14, 2017, in San Francisco (following SOCAP17)
October __, 2017, in Toronto (day after the Champions Retreat) 31