Prepared by Isabelle Roccazzella, Vittoria Rostagno, Fabio Alberto Regoli, Luca Saglione
Beyond Covid-19
The current emergency requires that companies reconsider their role: not only profit center, but also welfare generator.
Taking care of the stakeholders and the impact of a company’s behavior in not a matter f statements or discussions, but it is necessary that concentrate almost on a daily basis on who they really are, what the impact or their actions and investments are, so as to providing a meaning to the expression “corporate social responsibility”. It is essential reconsidering the role that the private sector (both companies or individuals) plays within our local communities.
We have to think about new business models and do it now, so as to be organized and prepared and not only when more favorable economic conditions return.
Benefit Corporations are a tool which the Italian legal system already provides for companies willing to have a structured and effective approach to their stakeholders and and include social targets within their company’s purpose: and this has nothing to do with renouncing to the profit, but with new and sustainable business approaches.
What the Benefit Corporations are
The Benefit Corporation’s corporate model was born in 2010 in Maryland (USA) and as from 2016 has been considered in Europe.
To date, Italy is the first, and the only, European country which has introduced Benefit Corporations, giving to the concept of corporate social responsibility a legal framework and acknowledgement.
The Italian discipline on Benefit Corporations, introduced by art. 1, paragraphs 376-383 and annexes 4 – 5 of Law No. 208/2015 (“Legge di Stabilità 2016”), does not provide for exceptions to the general rules on corporate law, but introduces specific requirements in relation to corporate organization and governance.
Purposes and benefit
The distinctive element of a Benefit Corporation is that of combining the achievement of profit through its business with a general and measurable impact over one or more categories of stakeholders.
The purposes of a Benefit Corporation must be expressly described within the company’s purpose and, consequently, pursued through the way in which the company is managed.
A Benefit Corporation must:
- pursue both a mutual and a lucrative purpose;
- pursue a «public benefit» (i.e. the pursuit, as a result of the way in which its business is conducted, of various positive effects, or the reduction of adverse effects, over one or more categories of potential beneficiaries and stakeholders concerned);
- have a responsible, sustainable and transparent management to its stakeholders.
Both newly established companies and already existing companies, simply through the amendment of their articles of association, in compliance with the applicable legislation, can be or become Benefit Corporations. And this does not constitute a new corporate type.
A Benefit Corporation may decide to use the words “Società Benefit” or the abbreviation “SB” in its registered company name and use such a denomination in the official documents, communications with third parties and share certificates.
Although the Legge di Stabilità 2016 does not expressly discipline the withdrawal right of the shareholders who have not approved the adoption of the resolution to amend the articles of association to become a Benefit Corporation, such issue is key, in this context as well as in any other situation of amendment of the articles of association.
The withdrawal right of a shareholder in the event a company is turned into a Benefit Corporation has to be considered within the rules applicable to each relevant company type.
Role and responsibility of the Directors and the Manager in charge of the achievement of the public benefit (“Responsabile del perseguimento del beneficio comune”)
The Legge di Stabilità 2016 identifies specific obligations for the directors of a Benefit Corporation in addition to those generally provided for each company type. By pursuing the purposes of a public benefit in accordance with the provisions of the articles of association, the directors have to take into account the company’s and the shareholders’ interest balancing them with the interests of the stakeholders as listed in art. 1, paragraph 376, Legge di Stabilità 2016 (i.e.:people, communities, territories and environment, cultural and social assets and activities, entities and associations and others).
The non-compliance with the said specific obligations may constitute a breach of directors’ duties as set forth by Italian law and/or the relevant articles of association, triggering their liability.
Art.1, paragraph 380, of the Legge di Stabilità 2016 also provides that the Benefit Corporation’s board of directors must identify an individual or entity to be entrusted with roles and tasks related to the public benefit.
The goal of the manager in charge of the achievement of the public benefit, either an employee or manager or an external consultant, is to strengthen the organizational structure of the company, providing assistance to the directors and supervising that all corporate procedures are suitable for the achievement of the public benefit. Said manager, together with the directors, is responsible in case of failure of the said achievement.
Public benefit, Annual Report and disclosure of non-financial information
Art.1, paragraph 382, Legge di Stabilità 2016, requires the directors of a Benefit Corporation to annually prepare a report on the public benefit to be attached to the financial statements, giving evidence of the activities carried out or planned, as well as the balance reached between the company’s and the stakeholders’ interests.
In order to protect the confidentiality of the beneficiaries, art.1, paragraph 383, Legge di Stabilità 2016, allows to omit certain financial data.
One may wonder about the relationship between the Annual Report to be attached to the financial statements of Benefit Corporation and the Directive 2014/95/EU, implemented in Italy by Legislative Decree No. 254/2016, introducing into the Italian legal system the duty for certain large corporation and entities exceeding certain dimensional requirements, as defined in Legislative Decree No. 39/2010 (“EIPR”), to prepare , for each financial year, a disclosure of non-financial information with regard to environmental, social, labour, human rights and anti-corruption matters.
Despite the large number of conceptual overlaps, it is worth noting that the Directive 2014/95/EU introduced an obligation tout court for the EIPR, while the Legge di Stabilità 2016 introduced a distinctive feature to traditional corporate types, which is based solely on the express adoption of a public benefit on a voluntary basis.
The Supervisory Body
Italian law does not provide any specific rules with regard to Benefit Corporation’s supervisory bodies: therefore, if the relevant company type requires the appointment of a supervisory body, the ordinary rules shall apply. The supervisory body of a Benefit Corporation have to assess the activity of the directors in terms of balance between profits and public benefits, as well as responsible, sustainable and transparent management of the company in favour of all stakeholders.
As for the independent auditor, the issue is more sensitive: it can be maintained that the auditor may (or perhaps even must) perform an assessment on the Annual Report on the public benefit to ensure a better alignment between the company’s benefit mission and the degree of compliance with the accountability standards (responsibility, fairness, transparency).
Enforceability
Art. 1, paragraph 384, Legge di Stabilità, 2016 sets forth that, in case of failure to seek the public benefit, the company may be fined by the Italian Antitrust Authority (“AGCM”) for the violation of the rules on misleading advertising (Legislative Decree No. 145/2007) and the Consumer Code (Legislative Decree No. 206/2005).
The purpose of this provision is to prevent Benefit Corporations, not pursuing the objectives set out in the company’s purpose, from taking any of the competitive advantages arising from their status, while misleading consumers and other market players. Therefore, the AGCM has broad powers to assess the conduct of the Benefit Corporation and initiate actions, also considering the commitments taken by the company.
Benefit Corporations: labour best practices
The organization of human resources and their development is addressed in the Annual Report on the public benefit. To this purpose, the company has to adopt internal evaluation standards and reporting principles based on best practices and guidelines implemented by leading certification bodies such as the Global Reporting Initiative and the International Organization for Standardization. The above-mentioned standards inter alia include:
- employment: recruitment and promotion of workers, creation of new jobs opportunities, equal treatment and non-discrimination policies, implementation of smart-working tools;
- working conditions and social protection: wages and forms of fixed or variable remuneration, working hours, work-life balance, disciplinary measures, maternity protection, dedicated canteen services, access to health services;
- social dialogue: consultation and exchange of information among government representatives, employers, workers and trade unions;
- health and safety: improvement of workers’ psycho-physical conditions and level of well-being, risk assessment (also with regard to specific categories of employees), provision of Personal Protective Equipment (PPE), continuous training of workers, elimination of psychosocial risks, adoption of a compliant corporate structure;
- human development and training on the job: development of human capital through the adoption of corporate welfare instruments aimed at addressing social issues (non-discrimination policies, appropriate balance of family responsibilities, health promotion).
Said labour best practices include productivity bonuses and corporate welfare services which represent an instrument not only to promote the well-being of workers but also to allow companies to obtain tax and contributory benefits provided that certain conditions are met (i.e. bonus value up to Eur 3,000 increasable to Eur 4,000 in case of joint involvement of the employees in the company organization; employee annual gross income not exceeding Eur 80,000).
The productivity bonuses may also be provided through corporate welfare benefits (i.e. food vouchers, nurseries, public transport subscriptions, health care, etc.), allowing in such way the company to obtain a tax and contribution exemption.
Why becoming a Benefit Corporation?
The choice to establish or become a Benefit Corporation allows the access to an increasingly sophisticated and developed market, environmentally, socially and culturally aware.
Becoming a Benefit Corporation is a choice aimed at improving the company’s reputation and achieving a leadership position in the market.
For instance, a Benefit Corporation is able to attract new talents, given that for the new generations the company’s values are a key element in their career selection path. Furthermore, a Benefit Corporation may obtain wider access to private capital investments, thanks to its accountability, transparency and legal safeguards commitments while pursuing its mission. Finally, consumers are increasingly keen on buying products from companies that pay particular attention to social and environmental sustainability.
As of today, in Italy, more than two hundred companies have been transformed into Benefit Corporations by an amendment of their articles of association or have been established as one.
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