B Corps and Hybrid Organisations: Challenges for Governing Boards

This paper addresses the corporate governance challenges involved in the hybrid organisational model, with particular focus on the composition and powers of governing boards. The research is based on four case studies of hybrid organisations that seek to combine financial and socio-environmental goals in their core. All four organizations have been certified as B Corporations, a system of certification developed by B Lab, a global non-profit organisation, to validate that an organization has committed to the idea that social and environmental goals are just as significant as economic goals. When analysing the role and composition of governing boards in these companies, our goal was to understand whether and how those devices of corporate governance engaged not just with founders and shareholders, but also with wider stakeholders in order to reflect and operationalize the companies’ commitments to social and environmental goals as well as economic ones. The paper shows that whilst in the literature the composition of governing boards is emphasized as central to promoting the balance of the different logics in the hybrid model, in practice none of the B Corp cases studied had a variety of stakeholders on their governing boards. We therefore suggest the incorporation of minimum standards of stakeholder representation on boards in relation to the B Corp certification process and conclude by encouraging future research that investigates the way in which hybrid organisations in general incorporate stakeholders into their governance systems.