Benefit Corporations Bill Signed into Law

An idea that was submitted last year as part of Assemblymember Jared Huffman's "There Ought to be a Law" contest by several residents from Sonoma and Marin counties was signed into law today by Gov. Jerry Brown.

The law — formerly Assembly Bill 361 — creates a new type of corporation that allows businesses to pursue positive impact on the environment and community in addition to maximizing profits.

“The best interests of the corporation are commonly equated with the financial interests of the shareholders, so any decision by the directors must be tied back to serving the financial interests of the shareholders," said Chris Mann, the CEO of Guayaki, a Sebastopol maker of mate teas and one of the people who brought the idea to Huffman.

Under AB 361, businesses can choose to incorporate as benefit corporations and enjoy advantages such as:

• Greater access to social impact and venture capital investments;
• Legal protection for directors and officers in their more broadly defined fiduciary roles of maximizing profits as well as ensuring social and environmental considerations; and
• Marketing opportunities that will allow consumers to distinguish, in a very real and ascertainable fashion, between a business that claims to be socially responsible, and one that is responsible.

“California must be a leader in attracting socially-responsible companies, investors and consumers,” said Assemblymember Huffman (D-San Rafael) in a statement. “Thanks to the Governor’s action, we now have a new law that sends a strong message to entrepreneurs that California is open for this emerging form of business.

The legislation is another victory for Huffman who is running to represent the new 2nd district in Congress starting 2013. During several last week, Huffman touted his track record as a state legislator and said that what the district needed was someone with political experience who "knew how to get things done." Huffman is currently a front runner in the race and last week received endorsements by numerous unions like the Petaluma Peaceofficers' Union, Operating Engineers Local 3 and others.