The state of California recently became another in the growing list of states to consider Benefit Corporation legislation. Introduced by Assemblymember Jared Huffman of the 6th Assembly District, representing Marin and southern Sonoma County, the legislation proposes establishing a new type of corporation in the state.
Assemblymember Jared Huffman’s website explains the proposed legislation:
AB 361 – Benefit Corporations: This bill creates a new type of corporation for a new type of corporate social responsibility. Current law requires corporations to prioritize financial interests and shareholder profits. This bill creates a new, entirely voluntary type of corporate entity to let California businesses balance the pursuit of corporate profits with environmental and social goals. “Benefit Corporations” would operate under a broadened definition of fiduciary duty that allows business leaders, shareholders, and employees to include environmental stewardship and community development as part of their companies’ mission – people, planet, and profit.
The ability to incorporate consideration of people, planet, profit – the triple bottom line – will allow Benefit Corporations to move past the limited focus on pursuit of financial profit, regardless of social and environmental impact. Instead, Benefit Corporations will be able to focus on making a financial profit while also being socially and environmentally responsible.
This follows on the heels of increasing momentum for Benefit Corporations nationwide:
- Maryland and Vermont became the first states to pass legislation last year.
- New Jersey and Virginia are awaiting the governor’s signature; legislation in both states has passed the state Senate and Assembly and both houses of the General Assembly, respectively.
- Colorado, Hawaii, North Carolina, and Pennsylvania have all introduced legislation this year.
The B Corp website provides a complete list of Benefit Corporation legislation on their public policy page.
If you’re interested in learning more about B Corporations, the post “What Are B Corps?” contains some helpful background information.