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Kickstarter picks social good over rich shareholders

Adriene Hill Sep 21, 2015
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The next time you contribute to some amazing innovation on Kickstarter, like, say, chocolate lollipops shaped like Queen Elizabeth II, you’ll be doing more than helping a candymaker raise money. You’ll be supporting the social good. 

Kickstarter has reincorporated as what’s known as a public benefit corporation

When a company goes that route, said Georgetown law professor Alicia Plerhoples, it “is affirmatively changing (its) fiduciary duties,” to put other factors ahead of profit for investors – factors like the environment, society and the welfare of employees. So far, only a very small number of companies have incorporated this way.

For Kickstarter, “this is a moment where we’re putting our cards on the table, ” said Yancey Strickler, cofounder and CEO of the crowd-funding site. “We’re saying this is exactly who we are. Exactly what it means to do business with Kickstarter”.

As a public benefit corporation, the company has legally bound itself to reducing its environmental impact, and give a percentage of its profits to organizations that support the arts and social justice. Strickler said Kickstarter will also avoid the types of loopholes that would allow it to lower its tax burden.

Helen Bowers, a finance professor at the University of Delaware, said investors in companies that put social good above profit could pay a price in the form of lower returns.

“If you have this equal obligation to some other public benefit, then there will be times relative to another company when a shareholder will not get that benefit,” she said.

What’s less clear, said Bowers, is if that will actually deter investors.

Yancey Strickler doesn’t think so. He said Kickstarter has been a profitable private company for five years.

“I think that for people that want to see change in the world, who want to see more companies act in this way, I believe they’ll be drawn to us,” he said.

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