PBCs have been around since 2010. Dozens of states now have laws permitting this type of corporate structure. Well-known examples of PBCs include Patagonia, Warby Parker, Allbirds, and Vital Farms Inc. A growing number of PBCs are publicly traded, reflecting the popularity of “conscious capitalism”; environmental, social, and governance (ESG) issues; and sustainability.
Nonprofit corporations have been around since the end of the nineteenth century and are associated with the Progressive Era, marked by political reform and social activism. As the name suggests, nonprofits are not permitted to distribute profits to their members. They also enjoy tax-exempt status that allows them to keep more of the money they bring in for their chosen cause, such as philanthropy or cancer research. There are different types of nonprofit organizations, but at their core, profitmaking is excluded from a nonprofit’s mission and purpose.
Public benefit corporations include profitmaking in their corporate charter. They may even prioritize financial growth. However, profits are only one part of a PBC’s corporate mission. Alongside maximizing shareholder value are social and environmental considerations explicitly spelled out in the corporate governing documents. For example, when Patagonia became a registered public benefit corporation in 2012, it adopted six benefit purpose commitments:
● 1 percent for the planet
● Build the best product with no unnecessary harm
● Conduct operations causing no unnecessary harm
● Share best practices with other companies
● Provide a supportive work environment
To ensure that companies do not just talk about doing good with no measurable results, PBCs must report to their shareholders every other year on what they have done to further the public benefits
stated in their corporate charter. And just as shareholders can file a lawsuit challenging whether the board upheld its fiduciary duty to investors, shareholders in PBCs have standing to sue the board to enforce the corporation’s public benefit purpose. Of course, this creates new legal risks not associated with traditional corporations.
Thirty-six states and the District of Columbia permit corporations to be organized as PBCs. Most PBCs are based in Delaware, according to Kiplinger. Under the laws of that state, PBC corporate directors accused of not delivering on public benefit goals have had stronger protections since 2020 and can opt-out of (or in) the PBC structure if a majority of shareholders vote for this.
Generally, in Delaware and other states, an existing corporation can convert to a PBC by amending its charter and bylaws, pending board and majority stockholder approval. However, the number of votes needed for conversion may vary from state to state. New companies can also incorporate as a PBC at the founding stage.
 Ellen Kennedy, What Are Public Benefit Corporations (PBCs)?, Kiplinger (Oct. 15, 2021), https://www.kiplinger.com/investing/esg/603598/what-are-public-benefit-corporations-pbcs. Hana Muslic, A Brief History of Nonprofit Organizations (And What We Can Learn), Nonprofit Hub (Oct. 27, 2017), https://nonprofithub.org/a-brief-history-of-nonprofit-organizations/.
 Ann. Benefit Corp. Rep., Patagonia, Fiscal Year 2019, https://www.patagonia.com/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dwf14ad70c/PDF-US/PAT_2019_BCorp_Report.pdf.