Benefit Corporation Bill Passes in California!

On October 9th, California became the newest state to pass benefit corporation legislation, creating a new, fully voluntary class of corporation in California called “benefit corporations”. This new corporate structure allows businesses to pursue a material positive impact on the environment and community in addition to maximizing profits. Previous corporate law required corporations to exclusively prioritize financial interests and shareholder profits. For example, this meant that executives could be sued for choosing organic ingredients over cheaper alternatives produced with pesticides that are toxic to consumers, workers and the environment. They could also be sued for giving back to the community if shareholders felt that was taking money out of their pocket. With this new legislation, businesses can choose to incorporate benefit corporations and enjoy these significant advantages:

• 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.

The legislation was proposed by Assemblymember Jared Huffman under Assembly Bill 361, which passed with overwhelming bipartisan support in both chambers of the California Legislature. The bill was supported by over 200 California-based businesses and associations. As noted in previous blog posts, we were more than happy to appear in Sacramento twice to testify in support of this bill. We’re thrilled that it passed and encourage you all to propose similar legislation in your state or consider becoming a Benefit Corporation!

Please note: while Dharma was a Registered B Corp at the time of this posting, it no longer is.