Saying the American Dream is on life support and in need of help, Republican Rep. Tom Forese of Chandler beat back bipartisan opposition to his bill allowing a new type of corporation — a benefit corporation.
Forese’s HB2276 would allow benefit corporations to form in Arizona, not for the sole purpose of maximizing profits, but also to do public good. Forese said it would offer entrepreneurs options in how they form and for what purposes, and encourage the private sector growth. The measure passed the House, 41-18, and goes to the Senate.
“Where is the American dream? I tell you it’s on life support. And I do not claim this (HB2276) to be the answer, I do not claim this is the only solution, but it pushes the needle. It incentivizes jobs, it incentivizes excitement in business again,” Forese said.
He said the business model would strike a balance between for-profit corporations and nonprofits, and would allow businesses to both earn a profit and do public good if everyone involved, including the shareholders, are in agreement about their intent. Twelve other states, both red and blue, have implemented similar models, he said.
Benefit corporations would not receive the same tax incentives nonprofits do, he said. The shareholders would still have methods of recourse if they felt they were wronged, as outlined in the bill and the benefit corporations’ articles of incorporation.
Forese noted he doesn’t think he would ever start a benefit corporation of his own.
But a bipartisan coalition of detractors said that such corporations aren’t necessary, that they would water down both nonprofits and corporations, and they could lead to social engineering.
Republican Rep. John Allen of Scottsdale said the profit motive has served the country well, and mixing capitalism with public benefit could lead to corporations engaging in social engineering.
Allen said Henry Ford kept a photo of Adolf Hitler on his desk, but wasn’t able to pass his ethos along through his corporation because he was only allowed to consider profit, not social change.
Democratic Rep. Debbie McCune Davis asked what kind of corporation doesn’t provide a public benefit, and said the state doesn’t need another type of businesses.
“Bottom line is we don’t need another tier in our mechanisms by which corporations are created. We have for-profits, we have nonprofits, why are we looking at this as a solution to a problem that this community already has adequate mechanisms resources to solve?” she asked.
Before voting against the measure, Republican Rep. Carl Seel of Phoenix asked what problem Forese is trying to solve with the bill and what type of business would use the benefit corporation label.
The bill’s supporters said a number of entrepreneurs in the state would like to start a benefit corporation. Democratic Rep. Ruben Gallego of Phoenix cited Seed Spot in central Phoenix, a nonprofit incubator focused on supporting Arizona’s socially conscious entrepreneurs, as an organization clamoring for the new designation.
The incubator houses more than a dozen businesses that also have social aims.
Gallego said he has several limited liability corporations with a few shareholders, and said if one of his shareholders thought he wasn’t maximizing profits, his shareholders could sue him under his articles of incorporation.
“If I wanted to run any kind of for-profit company but have a slight tint of some humanitarian cause to it, but still make profit, this is what I would file under,” he said.
Republican Rep. J.D. Mesnard of Chandler said the bill is pro-free enterprise and would allow business owners to conduct their business as they see fit instead of constraining them to what the government has previously defined as acceptable.
Republican Rep. Bob Thorpe said if allowing companies to operate in a new way spurs new businesses and does some public good, then he’s all for it.
“As a stone hearted conservative, I appreciate the idea of a corporation that not only is making profit, but also reaching out to its community and helping people at the same time,” he said.