The main goal of any for-profit business is to make money, but it’s not necessarily the only goal. For some businesses, it’s equally important to be good corporate citizens by serving the interests of numerous stakeholders. Profits are important – but they aren’t the only objective.
Many companies say the right things when it comes to good corporate citizenship. But Veeva Systems took a historic step earlier this year when it wrote corporate citizenship into its legal charter. In February, the Pleasanton, California-based software company became the first publicly traded company to convert to a Public Benefit Corporation or PBC.
As a PBC, Veeva remains a for-profit corporation but is legally responsible to balance the interests of customers, employees, partners, shareholders and other stakeholders. The company also broadened its certificate of incorporation to include a public benefit purpose as a way of helping the industries it serves become more productive and create “high-quality” employment opportunities.
“We’ve always operated in the best interests of our customers, employees, communities and shareholders,” said Peter Gassner, Veeva’s founder and CEO. “We’re excited to take the important step to put this in our legal charter so we can ensure Veeva’s accountability to all stakeholders continues for decades to come.”
Veeva provides industry-specific, cloud-based software solutions for the life sciences industry. The company was founded in 2007 and went public six years later. It has a market cap of about $47 billion and a stock price that trades at around $306 a share. It’s on track to report more than $1.8 billion in revenue and about $710 million in non-Generally Accepted Accounting Principles operating income this fiscal year. By any definition, Veeva is a very successful company.
That would normally be enough to make management and shareholders happy. But Veeva’s leaders believed there was more the company could achieve. Whereas the legal charter for most public companies requires them to focus almost exclusively on maximizing shareholder value, Veeva decided that wasn’t enough.
In a February column for the Medium.com, Gassner wrote that a sole focus on shareholder returns “does not work for society, especially as corporations become larger and more powerful, particularly through the use and reach of technology.”
It is especially dangerous when large tech firms become focused solely on shareholder returns, he added. “Software algorithms, powered by artificial intelligence, can determine the news we see, what we buy, the prices we pay and the credit we are given. If the goal of the algorithm is only to make money, it will optimize to accomplish that goal, to the exclusion of all else. It is not okay morally. But, it’s fine for a traditional corporation since its legal responsibility is to make money for shareholders.”
After Veeva crossed the $1 billion revenue mark in 2019, Gassner and other company leaders began to seriously consider the idea of becoming a PBC. As Gassner wrote, Veeva was moving into “uncharted waters” because no publicly-traded company had ever converted to a PBC. Management weighed the pros and cons, got feedback from shareholders, customers, and employees and formalized the process in 2020. Shareholders approved the conversion by a 99 percent vote on Feb. 1, 2021.
Veeva’s decision to convert to a PBC did not come in a vacuum. As Forbes noted in December, the concept of bringing purpose to the public markets “has taken root” over the last year-and-a-half, with numerous Certified B corporations and benefit corps going public, including PBCs incorporated in Delaware.
But as a company that was already publicly traded, Veeva took a different approach by committing to stakeholder governance as a means of providing favorable returns for shareholders.
“We’ve always believed that doing the right thing for customers and employees is ultimately good for shareholders,” Gassner said. “Aligning our purpose and charter will give customers continued confidence to partner with Veeva over the long term and help attract world-class talent to the company for decades to come.”