On February 1, 2021, Veeva is set to become the first publicly traded company and largest-ever to convert to a public benefit corporation (PBC). The move was overwhelmingly supported by Veeva’s shareholders with 99% casting a vote to show their support of the move. But what does this mean, and what even is a PBC?
In case you are unfamiliar with the term, a PBC is a for-profit corporation that is also legally responsible to balance the interests of multiple stakeholders, including customers, employees, partners, and shareholders. PBC is a legal incorporation status just as becoming a C Corp or LLC is, but a PBC company is also required to include a public benefit purpose within its charter that it must live up to. Currently, there are about 4,000 PBCs within the U.S., and the corporate structure is available in 38 states, including the District of Columbia. Some of the more well-known PBCs include Patagonia, Kickstarter, and This American Life. And now Veeva joins that list.
“Since the founding of our company, our vision is to build the cloud for life sciences, including the software, data, and services to help the life sciences industry bring drugs to market more efficiently and get them into the hands of the right doctors and the right patients,” Paul Shawah, Veeva’s Executive VP of Strategy, said in an interview with PM360. “And the lens that we use to make decisions is doing the right thing, but also serving our customers, the people, the life sciences companies, and the industry itself. So we’ve always operated with the industry’s best interest at heart, but our charter was focused exclusively on shareholder returns. We wanted to align how we were operating with our official articles of incorporation.”
Now, Veeva’s charter includes the public benefit purpose, “to help make the industries it serves more productive and create high-quality employment opportunities.” And remember, by becoming a PBC it is legally required to follow that directive. In fact, according to the company, shareholders that own at least $2M worth of shares (or 2% of the company’s outstanding shares if valued at less than $2M) could file a lawsuit alleging Veeva breached its fiduciary duty to balance the interests of stakeholders and the public benefit purpose.
“In terms of how we run the company and how we operate, there is no change because we’ve been running like this,” Shawah explains. “The only difference is now it’s a legal obligation that we have to think about the interests of these additional stakeholders that we have in the company.”
Living Up to Its New Public Benefit Purpose
According to Shawah, the way the company intends to live up to that purpose is continuing the work it is known for, which includes developing software, technology, data, and services that are focused on helping the industry be more efficient and to further advance the industry. More recently, the company has also been working on ways to connect the industry with their most important stakeholders, including doctors, clinical research sites, and patients.
In addition to ensuring they serve the needs of these multiple stakeholders, PBCs also tend to be more transparent with their shareholders. That is one reason why shareholders also voted near unanimously to approve Veeva’s proposal to declassify its board of directors. But the company must also meet certain requirements when it comes to the disclosure of information, including providing a report every two years on how the company is performing against the public benefit stated in its charter.
“As a strategic partner to the industry, we know the industry is placing their confidence in Veeva, so we wanted to more formally codify that confidence and the trust they place in us by essentially documenting it into our charter,” Shawah says. “This is about creating a lasting company that the industry can ultimately believe in.”
Veeva’s clients have also voiced their support of the move. In a press release statement, Rob Ciappenelli, Chief Commercial Officer, Dicerna Pharmaceuticals, Inc., said, “Veeva has been a partner for many years and is deeply committed to Dicerna’s success and our mission to develop innovative treatments for patients in need. We look forward to delivering innovative solutions to patient communities with Veeva’s continued support.”