What is a Public Benefit Corporation? Anthropic’s Unusual Legal Status and What It Means for Investors
When Anthropic filed its S-1 prospectus, investors may have noticed a peculiarity at the top.
Instead of the usual letters “inc.” following its name, Anthropic has “PBC,” which stands for public benefit corporation. It’s a different legal status from that of a typical corporation, and investors should understand the implications and expectations for a PBC before investing in Anthropic.
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What is a public benefit corporation?
A public benefit corporation differs from traditional corporations in that the board of directors is expected to take the public benefit into account, operate responsibly and sustainably, and create value for shareholders, as with most corporations.
A PBC must balance fiduciary interests with those of other stakeholders and the public benefit, the company has stated.
Anthropic’s mission is “the responsible development and maintenance of advanced AI for the long-term benefit of humanity.” Anthropic’s status as a PBC might explain why the company has, more often than its peers, expressed concern about AI moving too quickly or endangering humanity, and why CEO Dario Amodei recently called for a slowdown in AI development to ensure safeguards are in place.
There are only a handful of publicly traded PBCs, but OpenAI has also joined Anthropic as a PBC, completing its evolution from a non-profit organization to a capped-profit company and now a PBC.
Other PBC stocks include Lemonade, Vital Farms, Warby Parker, Coursera, and Zevia. Acting as a public benefit corporation can be an advantage for some companies, signaling to customers that it takes into account the interests of all stakeholders rather than just shareholders, though companies with social missions can also get distracted from the bottom line. Etsy, for example, was a B corporation before it went public, a similar designation to a PBC, but declined the requirement to convert into a PBC once it went public due to pressure from Wall Street, the difficult logistics of converting at that time, and a new CEO who was focused on driving profitability rather than the company’s traditional socially conscious mission.
What it means for Anthropic
Anthropic centers its company purpose around safety. Its goals include “building safer systems” and viewing “safety as a science.” The company explains that by saying “we treat AI safety as a systematic science.”
Anthropic also sees itself as part of a larger collective endeavor to develop and deploy AI safely, and it says it collaborates with “civil society, government, academia, nonprofits, and industry to promote safety across the field.”
Anthropic’s focus on safety could give it a reputational or practical advantage in AI, especially against entrenched tech giants like Meta Platforms and Alphabet, which have struggled with user safety over the years and have even settled lawsuits over such claims.
What it means for investors
Operating as a PBC isn’t necessarily meaningful for Anthropic investors, and companies like Lemonade have operated as a PBC with no significant impact on the company.
Being a PBC typically isn’t an issue until it becomes one due to challenges facing the company, as happened to Etsy.
In Anthropic’s position, however, as a company leading a revolutionary and controversial technology that has received mixed responses, operating as a PBC may be in the company’s best interest.
This is the best way for the company to show its stakeholders that it is focused on safety and on balancing interests, so that this powerful technology can evolve without causing destruction.
To that end, investors are likely to support Anthropic’s mission and recognize that it is both necessary and good for the business.
