How can social innovators and supporters understand the legislative process better? 

Simple, get involved.
That’s what Innov8Social did this past week when we joined a number of social enterprises, state legislators, and policy makers at the State Capitol in Sacramento to observe and testify in support of AB 361 in a Senate Committee hearing.  AB 361 is the California bill that would establish a new corporate form in California. Businesses that elect to incorporate in this new form (i.e. as benefit corporations) would do so with the purpose of creating a general public benefit with their business.
What is a general public benefit?
The legislation outlines a general public benefit as a “material positive impact on society and the environment“—taken as a whole and assessed under a 3rd party standard.

AB 361 at CA Senate Committee on Banking and Financial Institutions

The June 29, 2011 hearing for AB 361.AB 361’s sponsor, Assemblyman Jared Huffman delivered the first remarks to the California State Senate Committee on Banking and Financial Institutions, chaired by Juan Vargas.

He outlined key points of the legislation, which was submitted by a number of his constituents.  A few key points he noted:

  • incorporating as a benefit corporation would be completely voluntary
  • benefit corporations would be required to show material positive impact
  • benefit corporations would be required to meet higher standards of accountability and transparency
  • benefit corporations would create a way for consumers to contribute to social impact through their patronage
  • the concept of stakeholders (including the environment, community) would expand on the fiduciary relationship that exists currently between corporations and shareholders to maximize profit.
  • a version of the benefit corporation bill has already been passed in 6 states
Several witnesses then delivered testimony on the basis of their support of AB 361. These supporters included:
  • Ryan Williams of Method — a scientist at Method–a company that aims to do more than business as usual spoke about Method’s aim to improve the world we work in through supporting infrastructure changes such as AB 361.
  • Don Shaffer — an investor and President & CEO of RSF Social Finance attested to the hundreds of millions of dollars that have been invested in B corporations and underlined the interest of investors in funding social enterprises.
  • Donald Simon — an attorney and partner at Wendel Rosen Black & Dean and Co-Chair of the Legal Working Group & Founder of 2 environmental non-profit organizations pointed out the social entrepreneurial roots already tied to California and the need to update the arcane view of fiduciary duty in the state.
  • John Montgomery — an attorney and Co-Founder of Montgomery & Hansen and Co-Chair of the Legal Working Group behind the bill noted that AB 361 would make California a leader in social enterprise.
  • William Clark — attorney and partner in Drinker Giddle and Reath LLP who has been integral in formulating the model benefit corporation legislation that has been passed in 6 states.  He mentioned that he and B Lab (the organization co-sponsoring the bill) have been working on California’s legislation for the past 2 years.
A number of other witnesses provided brief testimonial support for AB 361 including leaders from: svt group, green age 360, One World Futbol, inNative, Worklore, Innov8Social, and others.
Was there opposition?

There were speakers who voiced opposition to AB 361. This included members from the California Association of Non-profits who were concerned about the impact AB 361 could have on state non-profit organizations seeking funding, noting a potential competition for resources.Attorney Steven Hazen also voiced concerns about the impact of any modification to fiduciary duty standards and the impact on shareholders. He also noted his support of AB 201, a bill proposing the creation of a blended corporate form called a flexible purpose corporation.

Did AB 361 pass?

After about an hour of testimony and answering of questions from Committee members, AB 361 went to vote. It was passed by the Senate Committee on Banking and Financial Institutions 5 (in favor) – 1 (against) – 1 (abstained).

It passed through the Committee.

What’s next for AB 361?

It is due in the California State Judiciary Committee next week where it will face a similar process of presentation, witness testimony, and questioning from Committee members.

What should we write about next?

2 replies
  1. Daniel Del Grande
    Daniel Del Grande says:

    Exciting development for California businesses that are B Corp certified. I hope the legislation flows through to State Agencies, such as the Department of Alcoholic Beverage Control, to allow a smooth transition to a businesses State-issued licenses.

    Reply

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