The new trend in tech: Public Benefit Corporations
Fifteen years ago, Public Benefit Corporations (PBCs) didn’t exist. Today, they have become a popular legal structure for some of the biggest tech companies in the world.
In the 200+ year history of U.S. corporate law, PBCs are a recent legal invention. The first state to pass PBC legislation was Maryland in 2010. Today, 41 states (and the District of Columbia) have laws that enable PBCs.
Unlike traditional corporate structures like C-Corps and S-Corps, which are designed to maximize shareholder value, PBCs promise an alignment between profit and a defined public benefit to society.
PBCs have been making news recently, with OpenAI’s recent decision to convert its for-profit business to a PBC controlled by a nonprofit parent entity.
In this week’s newsletter, we cover the latest news on OpenAI’s legal saga as a way to understand PBCs. What are they? Why are tech companies choosing this new legal structure? And does it represent a shift in how technology is governed?
// To be (for-profit) or not to be
OpenAI’s legal structure has evolved significantly since its founding in 2015.
- 2015: OpenAI was founded as a nonprofit organization with the mission to develop artificial intelligence in a way that benefits humanity.
- 2019: OpenAI restructured itself to address the need for large amounts of capital to compete in AI development. The original nonprofit became the sole controlling shareholder of a new for-profit entity that could raise outside investment, but investor returns were “capped” (initially at 100x their investment). Microsoft invested $1 billion in the company.
- 2025: Last week, OpenAI decided to transition its for-profit entity to a PBC. The parent nonprofit will control the PBC and be its largest shareholder.
People who have closely followed the OpenAI story will be aware of many more events than the summary here, including the firing and reinstatement of Sam Altman (OpenAI’s co-founder and CEO) in 2023, and the feuding between Altman and Elon Musk (also an OpenAI co-founder).
OpenAI is not the only fast-growing tech company grappling with the tensions of governance issues, bruised egos, and the lure of massive financial returns. But the stakes are high for a leading company in the global race to develop sophisticated AI. Today, OpenAI, and a small number of other AI companies wield enormous power. The fact that some of them are becoming PBCs requires a closer look.
// What are Public Benefit Corporations?
A PBC is a variant of a traditional C-corp legal structure, with the following notable differences:
- Purpose: A PBC enshrines in its charter that the company must pursue both profit and a stated public benefit (OpenAI’s stated public benefit is “to ensure that artificial general intelligence (AGI) benefits all of humanity.”).
- Fiduciary Duty: Directors are legally required to balance (not just consider) the interests of shareholders with those of the wider public.
- Reporting: A PBC must publish regular and transparent reporting that evaluates the company’s progress toward its impact goals.
PBCs differ from the B Corp Certification, a voluntary, third-party certification for companies to meet high standards in accountability, transparency, and social and environmental metrics.
Outside of tech, there are other prominent examples of PBCs, like Patagonia, Warby Parker, and Ben & Jerry’s.
// The PBC movement in tech
In addition to OpenAI, other notable tech companies are PBCs, including:
- Anthropic: The AI company behind the popular AI chatbot, Claude, was initially formed as a PBC in 2021. It has since layered on top of its PBC structure a Long-Term Benefit Trust, an “independent body comprising five Trustees with backgrounds and expertise in AI safety, national security, public policy, and social enterprise.”
- xAI: Elon Musk’s AI company was founded in 2023 as a PBC.
- Bluesky: The emerging social media platform developed on the AT protocol is also a PBC.
Becoming a PBC has many benefits:
- Mission alignment: By legally embedding its social mission into its company’s DNA, a PBC structure can help tech firms stay focused on long-term societal impact.
- Public goodwill: A PBC structure can lead to enhanced consumer, employee, and investor trust in the brand. For AI companies responsible for the development of disruptive technologies, becoming a PBC is a step (though a small one) in assuaging the public that those in power have broader societal concerns in mind.
- Greater transparency: PBCs are required to adhere to regular and transparent reporting requirements. However, these requirements do not require AI companies to reveal how their AI algorithms work (a complaint that many have raised). It’s unclear if a shift in legal structure will lead to the type of transparency critics seek.
// Do PBCs ensure responsible AI innovation?
It is unclear how OpenAI’s current nonprofit parent governance has influenced how the company makes decisions on the speed and development of its AI systems. And it’s unclear whether its conversion to a PBC will increase the chances it fulfills its mission.
Kelsey Piper, a senior writer at Vox, questioned the teeth of a PBC in a Vox article: “The problem is that the obligations of public benefit corporations are, for all practical purposes, unenforceable,” she wrote. “In theory, if a public benefit corporation isn’t benefiting the public, you—a member of the public—are being wronged. But you have no right to challenge it in court.”
Michael Dorff, a professor of business law at the University of California Los Angeles, said that only OpenAI’s shareholders—not the public—have the right in a Public Benefit Corporation to hold that corporation accountable: “It’s very hard for shareholders to win a duty-of-care suit unless the directors acted in bad faith or were engaging in some kind of conflict of interest,” he said. “Courts understandably are very deferential to the board in terms of how they choose to run the business.”
Kyle Westaway, an attorney at the firm Westaway that has experience in PBCs, told Project Liberty: “Public Benefit Corporations (PBCs) can significantly contribute to responsible AI innovation, but they don't automatically ensure it. While a PBC structure creates a better foundation for responsible AI development than traditional corporate forms, it's just one component of ensuring responsible innovation.” Check out Westaway’s guide to Public Benefit Corporations.
// PBCs, a sign of the times
On one hand, PBCs could be another way for corporations to virtue-signal while continuing to do what they were going to do anyway. That might be a pessimistic take—and the truth is that there are real legal requirements PBCs need to adhere to—but it’s unclear if the PBC legal structure represents a fundamental change in responsible tech development. It is certainly no substitute for effective policymaking and regulation, and the extent a PBC benefits the public is still largely up to the company itself.
On the other hand, the growth of PBCs is a sign that more companies, their board members, and their investors recognize the importance of responsible technology development and corporate structures that benefit multiple stakeholders. PBCs have entered the zeitgeist.
Still, PBCs alone are not enough. To align technology with the public good, we need more than new corporate charters—we need an accountability stack, such as:
- Digital public infrastructure, like decentralized open protocols that distribute power.
- Governance frameworks that embed public benefit into fiduciary duties.
- Transparency mandates that go beyond PR and into public reporting.
- Media access and public scrutiny that can illuminate how decisions are made.
- Policymaking and regulatory oversight that set enforceable guardrails.
PBCs are a useful tool—but they’re not a complete substitute for this full stack. Just as open protocols, algorithmic audits, and public input shape the technologies we use, we need layered systems of accountability that extend from boardrooms to communities.
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