Signaling the Adoption of the Benefit Corporation Model: A Step towards Transparency

Abstract

Using the signaling theory as a reference, this research conducts an in-depth analysis of the adoption of the benefit corporation model, a legal and governance framework introduced into Italian regulations in 2016 following legislation introduced by many US states between 2010 and 2013. Focusing on the experience of Italian benefit corporations, we explore how these businesses manage their signaling environment (signaler, signal, receiver, and feedback) to obtain greater transparency. The analysis focuses on companies’ bylaws, websites, and non-financial reports and suggests that the adoption of this new hybrid business model will only translate into an opportunity for greater transparency for one in four benefit corporations. The ability to strengthen the effects of adopting this model, adequate resources, and a long-term approach are required. The model, therefore, appears to present an opportunity for larger companies that have already invested adequately in the development of communication (web) and reporting (report) tools. The results seem to suggest that, on the contrary, for small companies with less experience, transformation into a benefit corporation may generate a risk of ambiguity.

Sustainable Hybrid Business Model of Benefit Corporation: The Case of an Italian Film Production Company

“…A benefit corporation is a status of commercial firms. It was originally created by B Lab, a nonprofit organization that promotes socially aware business practices by providing an opportunity for firms to voluntarily adopt responsible standards [18].…”

“…They try to combine profit orientation with capacity to produce positive impacts on both society and the environment. Thus, benefit corporations are traditional commercial firms obliged by law to follow higher standards of purpose, accountability, and transparency [18].…”

“…The legal status of "benefit corporation" is related to the provisions of its corporate bylaws, which must include common benefit goals, and to the responsibilities of the board of directors and the person in charge of sustainability [18].…”

“…The second element to be investigated was transparency. It can build trust between firms and stakeholders [18]. According to Galli, Torelli and Tibiletti [18], becoming a benefit corporation can be an effective strategy for firms that want to create an impact on their society but also consider their profit aim.…”

“…Among these, one of the most interesting is the benefit corporation. It has a legally recognized status of a commercial firm [18] that decides to incorporate social and environmental needs into the firm's mission, pursuing them in a contemporary way [19]. They commit to creating a common benefit for all stakeholders in addition to generating profit for the shareholders [20].…”