Chicago's Manufacturing Institute and Benefit Corporations: Aligning Stakeholder Interests

Chicago's digital manufacturing institute overseen by the Defense Department aims to build the next gen factory for U.S. manufacturing. The idea behind these national manufacturing institutes is to aggregate money and resources to shorten the time and cost to bring advanced research to market, thereby gaining competitive advantage. Modeled after a German research network, Chicago's public-private endeavor outraised the other three U.S. manufacturing institutes and has access to a super-computer to run prototypes and simulations at speeds and in numbers not previously possible for participants. Four more manufacturing competitions are underway, and legislative support is sought for a nationwide network of at least 15 more.

Chicago's institute is about integrating the supply chain -- having the right data in the right place at the right time, to make the right part in the right place, and doing it all for less. This means asking participants to align stakeholder interests for common economic good. That falls in the wheelhouse of benefit corporations and offers opportunities for collaboration.

Benefit corporations are not commonly thought of as building blocks for the for-profit sector. To the extent they are known, they often are associated with non-profit or low-profit social enterprises providing products or services to impoverished communities. Chicago has its share of such needs, and benefit corporations can elect this type of public benefit purpose.

But benefit corporations' role as building blocks for the new economy has greater significance in this author's opinion. Their public benefit purposes can focus on high-tech innovation for common economic good in the broader community -- the goal of Chicago's manufacturing institute. Delaware, for example, which is the home of American corporate law, authorizes benefit corporations of an economic, educational, environmental, medical, scientific or technological nature (among other categories).

Let's be very clear that benefit corporations -- regardless of the community they serve -- are for-profit entities, with the rigor that involves. They embody accepted business principles and are taxed the same as traditional corporations. They are responsible, sustainable and have a positive impact on society. They aim to build better businesses that generate common good -- something that should garner broad support in the wake of the recession. In fact, benefit corporations have elicited largely bipartisan support in the 23 states, including Delaware and Illinois, and the District of Columbia, which have adopted authorizing statutes.

The primary difference between benefit corporations and traditional corporations goes back to aligning stakeholder interests, the digital institute's core challenge. Benefit corp directors can consider stakeholder interests in addition to those of shareholders. Directors are legally protected from lawsuits by third parties who might otherwise consider themselves beneficiaries of the business's public purposes -- leaving it to owners to insure the business stays true to mission.

Participants do come to the table in Chicago incentivized by defense budget initiatives to both achieve savings and transition from ground wars to cyber threats. But they have countervailing concerns arising from genuine business issues such as liability or intellectual property, or, more simply, inertia. Media reports participants like Boeing struggling with supply chain issues and being criticized when they try to reach agreements with suppliers to lower costs. Yet there also are positive stories about Boeing's partnering with a Seattle nonprofit to manufacture aircraft parts using hard-to-place workers, so obstacles are not insurmountable.

The value of including benefit corporations in the innovation mix is that they have what participants in the digital institute are looking for: they come to the table predisposed by structure and MO to integrate innovation and stakeholder interests for the common good. Benefit corps can brainstorm operational experiences and partner with lab participants to meet supply chain needs.

The Midwest already has benefit corporations operating at this level. Solberg Manufacturing, Inc., for example, was one of Illinois' first statutory benefit corporations and already works with Rolls-Royce. Founded in 1966 and headquartered in Itasca, Solberg has developed a global presence in standard and custom filtration, separation, and silencing products that protect machinery, the environment and the workplace. It prides itself on state-of-the-art facilities, excellent customer service, innovation and sustainable responsibility. No Solberg employees lost jobs during the recession.

Benefit corporations hold lessons for participants in Chicago's initiative, and contributing to such innovation projects can move the conversation about them to a new level.