Hybrid Corporations: What Business Are You In?

Published on November 19th, 2010 | by

In the guest post below, Alice Korngold, Founder of Korngold Consulting LLC, asks corporate leaders, “what is driving you–mission or profits?”

by Alice Korngold

The new “it” thing in social enterprise is hybrid corporations. There are B corporations–benefit corporations–whose mandates are to serve the public good and also increase shareholder value. There are also L3Cs, low-profit limited liability corporations with a similar dual purpose. Translation: for-profit companies whose boards and managers are not expected to fully maximize the company’s financial value.

Here’s my fundamental problem with this: If you’re running the company, day in and day out, what is driving you–mission or profits, and how are you inspiring the troops? And if you’re sitting on the board, on what basis are you ultimately making critical decisions–mission or profits? Eradicating poverty in Africa, or making profits from the sale of financial services? It should be one or the other. And if you’re an equity holder evaluating the performance of your directors and managers, how do you balance the competing purposes–mission or profits? And will all equity holders strike the same balance? In a for-profit, the measures of success are clear; with competing purposes, how will the board know what success looks like?

First, to provide some background, there are at least two ways to become a B company:

For continuation, see Fast Company…http://bit.ly/bH0i5C

Guest post provided by 3BL Media
Image credit: Tom Raftery
via Flickr under a CC license


About the Author

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  • Majority of the companies will claim to have both profit and social responsibility addressed in their operations. So it’s hard to ask but rather easy to tell by a company’s actions.

    • Cindy

      I agree! The actions of a company speaks volumes not its marketing/PR campaigns.

  • I’d like to point out that this blog network is structured as an L3C. And I don’t see the issue. L3C’s specifically put a charitable or educational mission IN FRONT OF the profit motive, although L3C’s are still allowed to generate profits through their activities, and the scale of profits is not a prima facie invalidation of a subjugated profit motive. In our case, the goal is to meet the company’s centralized, fixed costs, pass breakeven, and then to intentionally stay as close to $1 profitable as possible, forever. I don’t see any ambiguity in those goals. If we had a Board, they would be very easy to measure and react to.