Senate passes DeSaulnier good corp. bill

Sen. Mark DeSaulnier, D-Concord

Sen. Mark DeSaulnier, D-Concord

Corporations with an eye on doing good may find hope in a bill by State Sen. Mark DeSaulnier, D-Concord, that passed the Senate on a 37-1 vote today.

SB 201 creates a new form of  for-profit corporation that may pursue societal and environmental goals in addition to making money.

The lone “no” vote came from state Sen. Tom Harman, R-Huntington Beach.

DeSaulnier says the idea originated during a lengthy discussion with former Knight Ridder and Contra Costa Times publisher George Riggs about how companies must put the financial interests of their shareholders above all other interests. Knight Ridder, a well-respected international news organization, was split up and sold after a few shareholders demanded a higher return on investment.

“Being profitable and socially responsible are California traditions,” DeSaulnier said.

Friday is the deadline for legislators to pass bills out of their respective houses. The legislation must pass in the Assembly and receive the governor’s signature before it could go into effect.

Read on for DeSaulner’s release.

Innovative Flexible Purpose Corporation Law Measure Moves Forward

Senate Bill 201 (DeSaulnier) is Approved by Senate

Senator Mark DeSaulnier (D-Concord) announced that SB 201 to create a new corporate form in California law was approved today by the Senate with a 37-1 vote.  SB 201 will give for-profit corporations the freedom to consider both purpose and profits.

“This bill will foster good corporate citizenship at a time when America’s confidence in Wall Street has been seriously eroded,” said DeSaulnier.  “Being profitable and socially responsible are California traditions.  SB 201 will help continue that tradition.”

SB 201 will create a new type of corporation in California, the Flexible Purpose Corporation, to integrate the for-profit philosophy of the traditional corporation along with a “special purpose” mission which is similar to a charitable purpose.  This bill will encourage and expressly permit companies to pursue one or more charitable or public purpose activities in addition to creating economic value for shareholders.

For example, SB 201 would allow a company to consider more than just the monetary return on investment for stockholders, the company may also consider the impact its business has on employees, suppliers, customers, the community, the environment and society as a whole.

A traditional corporation creates risks for corporate directors making decisions on the basis of a “special purpose,” if it is done at the expense of maximizing financial returns for shareholders. This is because corporate boards and management have a fiduciary duty to act solely in the interest of maximizing shareholder value.  Consequently, they cannot take social issues into consideration.

SB 201 enjoys the support of California Legal Working Group for New Corporate Forms (sponsor), the State Bar of California, Business Law Section, Corporations Committee, the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area and several companies.  SB 201 will next go to the Assembly for consideration.

Lisa Vorderbrueggen

  • John W

    When I read this, the music and lyrics of “Age of Aquarius” came to mind.

    Now, maybe the senator could work on Flexible Purpose Collective Bargaining, whereby the parties to public employee contract negotiations would consider the impact on the rest of us.

  • Elwood

    Another good example of why we should have a unicameral legislature which meets for a month every two years.