I recently learned about a new type of corporation, or at least for me it is new. It is known as a “for-profit benefit corporation”, AKA a “public benefit corporation”. It seems that the Tennessee State Legislature is considering a bill to recognize this new category of corporation in the state. In its articles of incorporation such a company may state a public social or environmental benefit as a purpose that is equal to or superior to maximizing profits for the shareholders. After hearing about the proposed legislation in Tennessee I have learned that there are already 20 states that have laws on the books recognizing this type of corporation.
The reason that this news story caught my attention is that had this option been available to us when we formed Parthenon Management Group I feel sure that we would have incorporated under that category. PMG is an unusual association management company in that we are owned by a non-profit association, the American College of Neuropsychopharmacology (ACNP). As the management team of ACNP we recognized that there was a need in the market place for a top quality management service for professional, scientific societies. We saw this need because we had frequent requests from scientists who considered ACNP to be a very well managed organization and would ask advice from us about how we do things. Realizing this need represented a market opportunity we formed PMG as a wholly owned subsidiary of ACNP to offer management services to other scientific societies.
In forming PMG we had three objectives. First, we believe in the missions of the groups we serve, and we want to help those organizations accomplish those missions. We don’t consider contracts with clients whose missions we are not interested in and cannot commit ourselves to. Second, we wanted to form a company that would provide an opportunity for a great group of people (i.e. our employees) to have an interesting and rewarding career doing something they love. Finally, we want to earn a reasonable profit for our parent organization by delivering excellent management services to our clients. Having these three objectives as our priorities, in that order, seems to make PMG a perfect candidate to be a public benefit corporation. Since there would undoubtedly be considerable expense and trouble to change our legal status I don’t anticipate doing that anytime soon, but I wish this option had been there when we formed our company.
Thinking about how this category of incorporation fits with PMG, I wonder if it should not be the model for all AMCs. Since an association management company is formed for the specific purpose of serving non-profit clients, why wouldn’t we want serving the public good of assisting the client organization accomplish its mission be a priority that is equal to or superior to earning a profit for shareholders? Something to think about for all of us in the AMC community.