It's great that RStudio is changing to a PBC. However from what I've read, being a Benefit Corporation doesn't actually mean anything.
- From my reading it's possible for a Benefit Corporation to still be taken over or bought out.
- Benefit Corporations can convert back to regular corporations (in contrast with most 501(c)3's which cannot convert to corporations except under very particular circumstances)
- Unlike a 501(c)3, the charter of a Benefit Corporation is not legally binding
It's not to say that being a Benefit Corporation is bad (or good), but rather to say that it's kind of meaningless. I believe people should judge a for profit company, which a Benefit Corporation is, by its leadership, not necessarily by its legal designation.
Fortunately the leadership at RStudio have made themselves trustworthy, at least by the fact that they're relatively transparent and most of their stuff is open source. I'd be curious to know why they just didn't become a non-profit. I assume the main reason is because they want to be able to raise capital more easily.
Disclaimer: I'm an RStudio employee. But this post is my personal opinion and not representative of that of RStudio.
Separately, I'm also a licensed (non-practicing) attorney; despite that, this isn't legal advice.
Some of the things you've said are correct, but are kind of skipping a few important steps.
Buyout: Any corporate buyout, particularly of a Delaware corporation, opens the board up to scrutiny and requires the consent of the corporate constituency. In JJ's presentation he cited Revlon which is an example of a dispute over a buyout by a major shareholder. So, yes, technically benefit corporations can be bought out, but they must approve of the buyout using the corporate governance rules of a benefit corporation.
Converting to a benefit corporation isn't easy- you pretty much require unanimous shareholder consent and it's fairly close to the amount of consensus you need to convert to a pure nonprofit. Same with converting back to an "any lawful business purpose" corporation. So again, yes it's possible, but it's very unlikely unless something convinces basically everyone with a stake that it's worthwhile.
I'm not sure where you're getting that PBC status is not legally binding- I didn't see anything like that in the Harvard link. Corporate purpose statements have a very real legal effect. Would you mind explaining more about this statement? I want to make sure I'm not mistaken.
Note that the article you cite was written a year before the Delaware Benefit Corporation Law was signed by the governor- so some of the things it says might be a little speculative based on the legal realities at the time.
If you want to learn more in depth, I can recommend "Benefit Corporation Law & Governance" by Frederick Alexander.
I am not an expert, but it appears there are two different "types" of "B corp". One has a standard corporate charter but is certified annually by a nonprofit called B Lab. The second has a special charter which frees its leadership from liability if they make a decision for social impact that has a negative impact on shareholder value.
Etsy was the first type but they let their annual certification lapse, while RStudio is becoming the second type.
It's interesting that many tech/product blogs do not easily link back to the parent site.
For instance, I didn't know what RStudio was, so I have to go to the address bar and remove the blog portion of the subdomain and the trailing url just to find out what the parent site is, instead of a simple link.
I first thought it's about R-Studio[1] the recovery software. Then I tried the main page and I had doubts. Only after I hovered over the "Products" it says "RStudio - The premier IDE for R" (ok, it also says something in the page title but that's not fully shown in any current browser, and there's a "RStudio Server Pro - Take control of your R code" on the first page, but I did not make the connection)
It's in the side bar, at the bottom. I agree with the original comment. That's quite poor design. Unless I'm seriously interested, I don't waste time looking at sidebars, let alone the bottoms of them
But what impact does this have? Are there legal remedies now available to users if they feel Rstudio has strayed from the charter?
fwiw, I have the impression that the team there is quite civic minded, so this is really a question about the law, and not some sort of implication about their motivation.
My belief is that instead of being shareholder focus that RStudio, Inc. is going to be customer and end-user focused. I'm not sure how this is held accountable. I suppose in the near term it would be a public relations form of accountability. I suppose in the future there could be some other forms of accountability such as licensure of software.
Yes of course. Yet usually it's focused on their product or service and profitability. I'm guessing since a public benefit corporation would have a different focus that is more end-user facing.
Public benefit corporations sounds nice -- at least on paper. But ultimately, PBCs still tend to have a bunch of outside shareholders who are expecting to make a profit eventually.
What I'd really love to see is more organizations considering a cooperative structure.
Cooperatives are 100% owned by their members (in the case of consumer cooperatives) or workers (in the case of worker-owned cooperatives). There are no outside shareholders, and so the pursuit of profit is not the ultimate goal; the happiness of the owners is. That certainly doesn't preclude making a healthy profit, but it does preclude short-sighted moves that eek out a temporary profit at the expense of the broader business.
Most people don't realize how widespread cooperatives already are. Every single credit union in the United States is a cooperative. Many insurance companies are cooperatives. The ShopRite chain of grocery stores and REI outdoor stores use a cooperative structure.
Of course, the downside is raising capital. But sometimes taking on debt is enough, and cooperatives can flourish in a variety of industries.
To add to your examples, Publix is one of the largest employee owned grocery stores in the US, and Vanguard is the largest mutual brokerage owned by its investor customers. It can be done!
It's interesting to see an organization like RStudio decide to change their status to a public benefit corporation, plus go through the process of becoming a certified B Corp. The nature of a PBC, in having more latitude to consider actions that don't necessarily build shareholder value as their primary concern, certainly seems to line up well with its open-source roots.
I've tended to associate PBCs with companies like Patagonia, Ben and Jerry's, etc.--ones that make physical things, rather make software (which seems more like intellectual property, to a degree? Mostly relevant in terms of material cost of reproduction). I'm curious to see what kind of impact this will have on their operations and direction, and if it might lead to a similar trend with other open-source-based corporations like Gitlab or Elastic.
I think this is also a very rational move. IDEs and tooling is just participial about actual performance of said software, but also about the culture and community it is embedded in. So going for a long term commitment to open source is a strong signal to users and other stakeholders.
Bringing up Gitlab in this regard is a very good point, especially after MS bought Github..
@hadley Your response to the tidyverse question was quite candid. Thanks for that! Hopefully Rstudio becoming PBC helps a lot of skeptists to support more!
Wow, I’d missed that thread previously. I learned R before the Tidyverse and even before ggplot. I cannot imagine going back to base R.
If I have one regret about the Tidyverse, it’s that Hadley and company don’t have a clone using Racket / Scheme as their tapestry. R got me into FP, but I feel like Racket is a more natural place for the ideas of the tidyverse.
My head is spinning. I am certain I heard about this weeks ago. I don't think it was through a backchannel or a rumor mill—I thought I had read something official about it. In fact, I've spoken to people several times about it, most recently yesterday. And when they expressed surprise, I went looking for the official announcement, and I couldn't find one.
Is it possible that RStudio Inc. made a soft announcement that they later pulled for re-tooling? Or perhaps my memory is faulty and I did just hear about it through a back channel. Obviously this is something that takes time to plan and execute so it has been in the works for awhile.
IMO the main contribution of RStudio is not RStudio itself (the IDE) but their general support of the R language. I think that this dynamic scene where R is still an evolving language is the true value.
I don't actually use RStudio itself (hurray for vim). Tidyverse is the obvious example of their contributions, but I don't mean just tidyverse (actually, there are some things that I don't like that much, like tibbles) [1]. I think a language like R really needs this kind of support due to its mantra: for statisticians, by statisticians. By that I mean that you should be able to get insights by sometimes only writing a handful of lines of code.
The ease of use of R, good libraries, nice graphs, and so forth is why I happily code in both R and Python.
They absolutely are not, and Ford v. Dodge concerned the rights of shareholders, in particular minority shareholders, to not have the value of their positions intentionally devalued through actions of the corporation's management. In fact, in the first sentence of the very article you posted:
> At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company.
As noted in the "Significance" section, value maximization is a legally-unprovable standard.
I was summarizing in as plain of English as I could in a single sentence.
Also from that page:
> This case is frequently cited as support for the idea that corporate law requires boards of directors to maximize shareholder wealth.
[...]
> However, others [...] found that it was an accurate statement of the law, in that "corporate officers and directors have a duty to manage the corporation for the purpose of maximizing profits for the benefit of shareholders" is a default legal rule
That's only true if by "maximize" you don't mean anything like the mathematical maximization of a function.
Due to the "business judgement" rule, the management of a for-profit company gets to do business just about any way they want without any legal constraint; all they need is some reasonable rationale for why it might somehow, in the long term, benefit shareholders.
This includes giving stuff away and selling stuff for a loss, as many unicorns do. It includes paying employees very well, as some companies do. It includes making donations to charity. It includes either sticking to their original business, or deciding to spend a lot of money breaking into a new business.
In practice, shareholder primacy happens less because of what's legally required and more because many companies have management and employees who are shareholders. If the company stock goes up, the employees do well, and this promotes a culture where people try to make the stock go up.
For daily business, sure, a lot of public benefit can be justified monetarily. Of course, there are exceptions, and a PBC would be allowed greater ability to choose.
As I understand, another big benefit is the ability to use public benefit as a protection from hostile takeovers from companies that might undermine the PBC's social mission.
All limited liability partnerships have a field of business registered (however broad or vague, but it has to have at least one; some jurisdictions also standardise those fields of business) and you usually need supermajority to split, merge and/or change the registered field and/or name. Or do you mean PBC charter can limit further than business licensure requirements?
I would have more faith in the concept of "public benefit corporations" if it meant that e.g. Kickerstarter was prevented by its charter from suppressing the self-organizing of its workers.
I think it'd be cheaper to ask the people you spoke with to learn some new communication skills, instead of firing and hiring an entire department. Like, whoa dude. That's waaaay too much paperwork
- From my reading it's possible for a Benefit Corporation to still be taken over or bought out.
- Benefit Corporations can convert back to regular corporations (in contrast with most 501(c)3's which cannot convert to corporations except under very particular circumstances)
- Unlike a 501(c)3, the charter of a Benefit Corporation is not legally binding
It's not to say that being a Benefit Corporation is bad (or good), but rather to say that it's kind of meaningless. I believe people should judge a for profit company, which a Benefit Corporation is, by its leadership, not necessarily by its legal designation.
Fortunately the leadership at RStudio have made themselves trustworthy, at least by the fact that they're relatively transparent and most of their stuff is open source. I'd be curious to know why they just didn't become a non-profit. I assume the main reason is because they want to be able to raise capital more easily.
Source: https://corpgov.law.harvard.edu/2012/05/13/benefit-corporati...