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 something unusual near the top.
Instead of the usual letters "Inc." after its name, Anthropic uses "PBC," which stands for public benefit corporation. This is a different legal status from that of a typical corporation. Before investing in Anthropic, investors should understand what being a PBC means and what is expected of such a company.
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What is a public benefit corporation?
A public benefit corporation is different from a traditional corporation because its board of directors is expected to consider the good of the public, run the company in a responsible and sustainable way, and create value for shareholders, just as most corporations aim to do.
Anthropic has said that a PBC must balance its legal duties to serve the company's interests with the interests of other people and the public good.
Anthropic's mission is "the responsible development and maintenance of advanced AI for the long-term benefit of humanity." Its status as a PBC may help explain why it has spoken more often than similar companies about the risks of developing AI too quickly or putting humanity in danger. It may also help explain why CEO Dario Amodei recently called for AI development to slow down until proper safety measures are in place.
Only a few PBCs have shares that trade on public stock markets. OpenAI has also become a PBC, completing its change from a nonprofit organization to a company with limits on profits, and now to a public benefit corporation.
Other publicly traded PBCs include Lemonade, Vital Farms, Warby Parker, Coursera, and Zevia. Being a PBC can help a company by showing customers that it considers the interests of everyone affected by its decisions, not just its shareholders. However, companies with a social mission can also lose focus on making money. For example, Etsy was a B corporation before it went public. This is a similar designation to a PBC. But Etsy chose not to become a PBC when it went public. Wall Street pressure, the practical difficulties of making the change at the time, and a new CEO focused on increasing profits all played a part in that decision. The new CEO put less emphasis on the company's traditional mission of acting in a socially responsible way.
What it means for Anthropic
Safety is at the center of Anthropic's purpose. Its goals include "building safer systems" and treating "safety as a science." The company explains this approach by saying, "we treat AI safety as a systematic science."
Anthropic also sees safe AI development and use as a shared effort. It says it works with "civil society, government, academia, nonprofits, and industry to promote safety across the field."
Anthropic's focus on safety could give it a good reputation or a practical advantage in the AI industry. This may be especially important when competing with major technology companies such as Meta Platforms and Alphabet, which have faced problems involving user safety over the years and have even settled lawsuits related to such claims.
What it means for investors
Being a PBC may not make much difference to people who invest in Anthropic. Companies such as Lemonade have operated as PBCs without seeing a major effect on their businesses.
Being a PBC usually does not become a problem unless the company faces a difficult situation that makes its responsibilities harder to balance, as happened with Etsy.
But Anthropic is developing a powerful new technology that has attracted both support and concern. Because of this, operating as a PBC may be the best choice for the company.
This legal status gives Anthropic a way to show its stakeholders that it cares about safety and tries to balance different interests. The goal is to allow this powerful technology to develop without causing harm.
For these reasons, investors are likely to support Anthropic's mission and see it as both necessary and good for the business.