(FORTUNE Magazine) – When Massachusetts and local governments like the city of San Francisco began offering marriage licenses to gay couples recently, experts predicted legal and taxation nightmares for benefits managers, who would be left to figure out whose marriage is legal and in what jurisdiction. Although Massachusetts recognizes gay unions, the federal Defense of Marriage Act, passed in 1996, does not. But for many companies in Massachusetts, May 17--the day the Bay State began allowing gay couples to wed--wasn't exactly a watershed moment. That's because this is one issue in which corporate America has been ahead of the curve. At Boston-based Gillette Corp., "We had already been treating gay partners as spousal equivalents," says spokesman Eric Kraus. At Fidelity Investments, HR officials notified employees that all domestic partners would receive the same benefits as married spouses. Crisis averted.

Politically, though, corporate America's increasing acceptance of same-sex relationships puts it at odds with much of the country, if polls are to be believed. In the past year the likes of General Electric, Lockheed Martin, Merck, Pepsi, Sears, and UPS have all added domestic partner benefits plans. In 1998 just 13% of the FORTUNE 500 offered benefits packages for same-sex partners of their employees. Today, according to the Human Rights Campaign, a lesbian and gay advocacy group, that number has increased to 40%. Most of those programs offer domestic partners the same raft of benefits given to heterosexual spouses.

But make no mistake: There's no socially progressive agenda at work here. Most companies that offer partner benefits simply think it gives them a competitive edge in recruiting and retaining workers. Take IBM, for instance. In 1995 the computer giant acquired Cambridge, Mass., software maker Lotus, which had been the nation's first publicly traded company to recognize gay partnerships in its benefits offerings in 1992. At the time, IBM wasn't as broad-minded in its definition of deserving beneficiaries. "During the acquisition, the question was, 'Who's going to change, us or them?'" says IBM spokesman Jim Sinocchi. A year after the acquisition, it was IBM that ended up adopting Lotus's policy. "We realized it was unfair to have an employee working for our company who couldn't get benefits for a loved one." Indeed, the plans engender good will at a relatively low cost since, on average, only about 1% to 2% of employees enroll.

Though many business leaders are loath to say it, they are dreading the possible passage of President Bush's proposed Constitutional amendment to ban gay marriage. It could mean, for instance, that existing benefits plans for same-sex couples could be legally challenged as unconstitutional. Says Gail Morse, a corporate tax lawyer who's with Chicago's Jenner & Block: "Companies don't want to be put in the position of being a referee. They want simplicity. Just check the box. Do you have a committed partner or not?" --John Simons