On February 1, 2021 Veeva Systems officially became a Public Benefit Corporation (PBC). With this move, it becomes the first technology company supporting life sciences to transition to a PBC and is also the first publicly traded corporation in any industry to make that move.
“We remain a for-profit company, but we have adopted a public benefit purpose,” says Paul Shawah, Veeva’s SVP of commercial strategy. “A public benefit purpose is defined by the company, and for Veeva that purpose is to make the industries that we serve more productive and to create high quality employment opportunities in the markets that we serve.”
A traditional corporation has one stakeholder in mind, and that's the company’s shareholders. Corporations are obligated to generate the highest financial return for their shareholders. A PBC has multiple stakeholders, including customers, employees, and the society as a whole. Shawah states PBCs are obligated to balance the interests of all those varied stakeholders, which gives companies more flexibility in the decisions it makes.
“This is far more than a company posting a statement on their website,” says Shawah. “This goes back to the principles of our founder, Peter Gassner. PBCs did not exist when he founded the company, so Veeva became a traditional for-profit corporation focused on shareholders. Peter was never comfortable with that, so he tried to align our values and our decisions with our employees and customers.”
Whenever the company had a decision to make, whether it was big or small, it asked if that decision was good for employees and customers as well as investors. Shawah notes employees and clients have always noticed and appreciated that approach. When the ability to become a PBC became available, the company took the opportunity to formalize what it had been doing since its inception.
No Change In Operations
From an operational standpoint, there will be no noticeable change in how the company conducts business. It will simply have a legal mandate to consider additional stakeholders when making decisions.
“The key word is balance,” says Shawah. “Previously, we were not legally obligated to consider the needs of those stakeholders. There was nothing in our charter that said we had to consider what was best for employees, customers, and the industry. Now there is. We feel we are correcting a disconnect that we always felt existed. Every decision has financial impacts and implications. We are now legally obligated to think about the implications on our other stakeholders.”
For example, if several companies were to express an interest in acquiring a company, stockholder value would be maximized by selecting the suitor with the highest offer. A PBC would be mandated to also consider which company would best support employees and customers. Even if the final decision is the same, additional factors would be incorporated into the decision-making process.
“It doesn’t matter if these decisions are large or small,” states Shawah. “We need to consider our stakeholders in all decisions. Even small decisions, those day-to-day decisions that companies make, can add up and have a meaningful impact on the industry. We look at all decisions with a broader lens and try to balance the needs of all stakeholders.”
Although becoming a PBC will force Veeva to be legally responsible to additional stakeholders, the decision to become one seemed to sail through with little opposition. Ninety-nine percent of Veeva’s voting shareholders supported the decision.
“There are two ways to look at it,” says Shawah. “We are now more obligated to do specific things. But at the same time, we also have more flexibility to make decisions that are in line with the needs of our employees and customers. That flexibility allows us to align ourselves with the long-term objectives of the industry in which we operate. We believe if we properly align ourselves with the best interests of our industry, employees, and customers, that we will also be acting in the best interest of our shareholders.”
A Common Vision
Shawah certainly sees the PBC designation as a positive for the company, not a hinderance. The new focus on employees should help the company with a tangible benefit it can pitch when recruiting employees. Many employees prefer to work for a company that they perceive to have a higher purpose.
“We believe the employees we hire want to work for a company the creates quality employment opportunities for them while also helping to make the life sciences industry more productive,” he says. “This can be a good recruiting tool for Veeva while also helping us to locate a more committed, passionate, and higher-quality stream of job candidates. Our employees know we have formalized the fact that we're going to align our decision-making with their long-term goals and what they're trying to accomplish in the industry for our customers.”
Expect Veeva to share this news with their pharma customers as well. Shawah notes he has already communicated the news to several clients, who overwhelmingly viewed the transition as a positive change. He believes the PBC designation will give clients greater confidence that Veeva will be a durable, long-term strategic partner that can build a relationship with customers that will outlast the existing leadership team.
“Peter Gassner, our CEO, and our employees have been operating under this philosophy for all 14 years of our existence,” says Shawah. “Still, we know people will leave companies and new people will be hired. As a PBC, our customers know our way of doing business will not change as our employees change. Our philosophy is now noted in a legal document for all to see. The PBC designation formalizes how we will always do business with our employees and customers. The decision was a pretty simple one for us.”
Shawah also hopes more companies will make the transition, especially those serving the life sciences. For some, the change will not be easy.
“We did not have to change the way we operate,” adds Shawah. “The only hurdle we had to overcome was getting shareholder approval. For other companies, changing the way they operate will be a far greater challenge. There is inertia that must be overcome to evolve into a PBC. I do hope this becomes more of a trend and an opportunity for companies. If done right, I think a PBC can build stakeholder value while also generating higher shareholder returns in the long term.”