risk of being sued it for deviating away from their primary goal. and there is such a demand there, such a desire stopping them from doing it. >> the flip side of that, too, will be pent-up money out there for investors that they want to invest in companies that don't feel protected with their investment dollars because the company can change the activities at any point in time. it is a contractual relationship between directors and the investors to say that we are going to both go forward. the outcome has been very good results in keeping people employed during the downturn in the economy. they don't lose jobs, they

maintain the jobs because they are thinking long term. they don't go with the cycles of the market, and that is one of the reasons why he wanted the courage to grow these companies. president o'brien: of cake, i will defer. >> llc's would have to convert to a corporate status. they are under contract law, so the concurrently have these things within their structure, but they don't typically grow to attract investors, because they don't normally invest in llc's. you may want to hear from some of the businesses that have decided to become a benefit corporation.

>> we will go to item seven, and have public comment for both yours and the legislation at the same time. i think it will answer a lot of questions. >> item 7, discussion of possible action to make recommendations for border super vials -- supervisors benefit corporation discount. >> it is great to be back on the commission i served on some years back. i want to apologize ahead of time, i blocked out for the three items i have and i have to speak -- my eight is here. i will speak quickly, ed will be happy to engage in further conversation after this evening if that is what folks want to do. let me provide on a broader

context that you have in front of you. in recent years, our city government has chosen to provide various policies to in cent different industries. for example, i believe the support of every example i will give. he twitter the and zynga -- the twitter and zynga changes last year, small businesses, micro businesses through the local business enterprise program. as a city, we made decisions. we changed city policy. this area you're talking about today really reflects a trend that has developed over the last 15 years around companies that want to be more virtuous. companies that are not just

trying to maximize profit, but do something good for the community. these are companies that have double or triple bottom lines, and there are many examples of these types of companies. the presentation before this item referred to the company's better doing good work by the environment, companies that are employing individuals. disabledindividuals and seniors, companies in sustainable practices, as a that many of the types of companies we're talking about have had their start in the bay area. it has been fostered here in the bay area. we have seen and that the rest of the country is catching up to this. there is passed legislation to put benefit corporations on the

map. this is a field that i think anyone who observes knows is exploding. we put ourselves out there as a city that wellcome's benefit corporations. when you have a national debate about social responsibility, it is important for us to support companies that are doing well and doing good. i should also mention that philadelphia became the first city to provide tax benefits to benefit corporation. the specific legislation that you have in front of you is modeled after current contract bidding preferences for local businesses and micro enterprise businesses. this legislation is modeled after those types of programs.

to receive this contract preference, the business would have to be legally recognized by california. in the legislation, we put some specific numbers down, but we are very open to feedback on what might be the right number. by legislation states that for benefit corporations, we provide an 8% preference. for local benefit corporations, we provide an additional 2%, simply to state that these kind of companies, we welcome them. we want them to start here, we want them to grow here, we want them to be headquartered here. i want to address a couple of points that commissioner dwight mentioned. he is someone that i have worked with and the want to thank you for your leadership.

the local manufacturing industries and other companies are exactly the types of companies i would be hoping to assist with this kind of legislation. i understand that your company is the type of company that is virtuous. those of the types of companies that we should be targeting with our contracts. we should give them a small lead up in the contract in process and it should be able to hopefully get more of the city contract and companies that may not be as virtuous. that was not the impetus for this, but i appreciate and want to hear your feedback. know that this is really the beginning of a conversation of what i hopefully a city that does welcome these types of companies. this is a relatively new concept for most folks and it might take a little time to understand, but i believe that in five or 10 years, this will be in every state in the country. i want san francisco to be in

the forefront of opening the doors. i am happy to answer any questions. commissioner clyde: thank you, supervisor. the bid preference of 8% and 2%, is that in addition to or instead of the local -- >> they would receive a 2% had preference. in other words, that have a total of 12% bid preference, a slight advantage over local companies that were not benefit corporations. four other companies that are not local, we proposed an 8% bid preference. not as much of a preference, but enough to put you in the running. i will say, i'm very open to

feedback on what the right numbers are, but we thought it might make sense to start with some sort of a bid preference. we have asked for feedback and continue to get it. commissioner riley: supervisor, we are all in agreement that we welcome the benefit corporations. it is a good thing. the confusion is, how do we qualify? we just apply? i am sure business owners will want to spend the time to go and apply it turned out to be that you don't qualify. since this is a new concept, do you foresee some changes in the future to clearly identify what they have to do in order to qualify to be a benefit corporation? >> and the state law clearly defines what is necessary for benefit corporations to qualify itself.

it's sort of lays out the criteria by which a company has to a test and change the bylaws to essentially say that we do stand for being a company that has a corporate purpose, a level of accountability and the level of transparency that sets us apart from corporations that are not benefit corporations. just to be a corporation at all, you have to test certain things through bylaws and your signed under penalty of perjury that that is the case or you can be subject to all sorts of penalties and investigations by state authorities. that is all they have to do, and you don't have to do very much, as i think we all know. i think every single one of you have run companies, as long as you have corporate filings. you stand as a standard

corporate entity. commissioner dwight: what is the time frame? for example, my company would have to turn -- change the state of incorporation, and in that step, we would create ourselves as a b-corp in california? >> yes. commissioner dwight: that would be the process. it would take time. we don't presently bid on any city contracts, but if a company is presently engaged, you're competing against [unintelligible] >> under the legislation, we go

through a normal legislative process. it was going to affect 30-45 days after that. that is something that is also under discussion. it will get into affect on feedback and would be -- the states are looking at this. if there are concerns that people have about when this should go into effect, make sure that we have a fair playing field, i am open to that. commissioner dooley: i like the idea of this legislation, and my question is more about the percentage. kind of a tossup whether it is

more beneficial for us, a local company to have a contract versus and out of town b-corp. i'm thinking maybe 8% is too much. does it give too much of a jump, to give more of a nod to the local companies? >> i have to say, i completely understand that perspective and a share a little bit of that myself. he of the commission feels a smaller number is more appropriate to give a little bit of a preference, i don't know if the number is two or four, but i am open to that feedback. that is another feedback, but i

just wanted to kick start the conversation. commissioner clyde: i would like to refer to a previous hearing where we discussed the been preferences between local businesses and non-local businesses. at land use today, the cost of employing people here in san francisco are 10%-25% higher than just employment costs 10%- 25% higher than other counties. we discussed that the appropriation differential for been preferences would be closer to 15%, and with the budget, it was not doable. at that time, 15% was not doable.

i do want to call attention to that. i wouldn't be interested in lowering 1 and increasing the other because commissioner dwight did bring up the cost of administering these programs in addition to the many programs and record keeping mandates that are on small businesses already. maybe an increase for the local and a decrease, again, that is a discussion. it would be closer to 15%. >> i will say right now i would very much support an increase in the bid preference for local businesses. oftentimes, local businesses are not as competitive as they need to be in our own contracting practices. if the commission would prefer

us and my legislation to reduce the out of city bid preference for benefit corporations, i am happy to do that. it would take a bigger piece of legislation, but it is something that i would support. >> it is not my desire to complicate the issue even more, but it is a legitimate comment to make. perhaps it is specific to each type of business, but i have to believe that for a lot of the businesses, if the service being provided by an entity outside of san francisco or the bay area, it is inherently going to involve being less green when a company that is providing the service in san francisco. just the fact alone that if it is labor-intensive, they have to bring people from outside the san francisco -- to san francisco. that has an effect.

we don't want someone to make a wise crack but got preferential furbishing a good company, but they are creating as much pollution doing the job because they are outside -- just a comment by wanted to make. >> i appreciate that, i think it might be true in certain industries like the one that you represent. in other ones, there are lots of goods and services that can be provided without the transportation cost. a point well taken. i am hearing some feedback that for non-local benefit corporations, there is a desire to ratchet that number down. if anyone has a suggestion, i would be all ears. >> i would like to thank you for your leadership on this legislation. i've been reading about benefit

corporations allot in the last six months, and there is no city on the west coast that is doing this correctly right now. i think it would be an awesome thing if we were the first one. >> that is very much my thinking behind this. with that, unless there are other questions, i'm bummed. i was prepared to speak to all three of my pieces of legislation. i wasn't sure if you want me to take a moment to talk about the other two or ticket in order. my aid can also do the same. >> commissioner adams, you would need to -- commissioner adams: we would have to do public comment.

>> extend the item and read- refer it back to be heard and call the other items for the supervisor to make his introduction. and those with me to be referred to called b back. close of the item and refer back to 6 and 7. >> she is probably better than her boss, so not to confuse things, why don't we keep it in the order in which it was. if i could make to closing comments, another has been a lot of discussion about the role of the small business commission ha, two of the three pieces of legislation, we very much want to move forward with them. i know there has been a discussion about whether the small business commission might mean more than once a month. given the volume of legislation, we move about 2000 pieces of

legislation a year, and many of that touches upon different aspects of the small-business world. rest assured, i would support that. i am happy to support that during the budget process. i wanted to mention that because i feel bad for having to leave at this point. i know we have commissioners departing, this is probably your last meeting commissioner clyde and commissioner o'connor. i brought certificates of honor from the board of supervisors and recognition and the points of the work. i will give them to the executive director to present them to you, but i wanted to say thank you for your service. the rules committee will be considering several new applicants, and hopefully you will have your full panel of seven to give us feedback. >> it's in your hands,

katherine. commissioner adams: we will open this up for public comment and it will be on item 6, the presentation that we had on the benefit corporations, and also item number seven. i am opening this up for public comment. do we have public comment? >> i neglected to mention when i called item seven, it is a legislation digest. along with a list of companies that are b-corp certified or benefit corporations and to the state of california. if you would like to stand up on the side wall over your head and speak your name clearly, please.

>> my name is matthew bauer and i am president and co-founder of better world telecom. we just moved happily into our new offices, and i am sort of a kitten in a candy store right now after being involved since 2004. one of the first companies to bring this forward, to have this kind of discussion going down. it is very enlightening for me and i want to commend supervisor chiu for bringing this forward. i myself am on the board of american sustainable business council, and literally over 100,000 businesses that are

having the same ideals, the useful comments that i can make based on my 25 years of experience, i feel this will attract companies to san francisco. it catches and on the leadership position. the unofficial leadership position, that amount of capital that exists here, the people and the organization's that have paved a new path for businesses and society, the other thing is to stimulate companies within san francisco to step up to certification or to a higher purpose. the ripple effect, they treat their employees and a different

way. the particle out into the community and i can advocate for that. on behalf of the hundreds of other corporations out there and other types of companies, there is a commitment that israel and has a true impact on the communities. it follows on well to the state legislation, it is a perfect complement because it gives us companies that are trying to live up to a higher standard of playing field, finally after all these years to operate on that it separates us -- it's a $500 billion industry. i compete against at&t and verizon. i am spending the time to do these certifications. it is truly something that i think will be a landmark ripple effect.

i appreciate you will considering this and your comments i think have been great. we look for the moving this forward in some shape or fashion. >> my name is david and i am a co-founder and director of an organization called the american sustainable business council. socially- responsible business, and small business. before that, i did 25 years of work in the management- consultancy, and i have seen extraordinarily good businesses and that also seem quite a new business practices that i wish i had not seen, which were damaging to the staff, damaging to the general public, and damaging to the investors, frankly, so i believe we really

do need the b corp. status, and i am glad we can do that if for no other reason than so we can have a safe harbor, said that those you want to do the right thing are supported in that. we have to make it easier and more profitable to do the right thing and harder and less profitable to do the wrong thing, if we are going to of businesses that work well for the public and the economy as a whole as well as for the investors. we just have to make that possible, and i am glad this does make this possible, so i think you, and i encourage you to support this and to do everything we can in making san francisco a leader in promoting this. president o'brien: thank you. >> i think it is a great idea,

but i think, commissioner clyde has already talked about it, between local businesses and whenever these assets companies, i would assume a company from out of the city, out of the state going to do this is going to bid on business city is going to be a larger company, said they will have scale, so it to% difference from a local preference, i think 10%, and they are 8% is not that much. and you also mentioned that there is like a 10% or 15% difference in in play cost. i think that depends on the business. in my business, you obtain a payroll tax. i am paying health benefits. to compete with somebody outside of san francisco who bids in san

francisco who does not pay any of those things. it is a big difference. also, minimum-wage. that is a lot more than 10% or 15%. so when you do this, the gap has got to be bigger. >> thank you. any other for public comment? seeing none, public comment is closed. president o'brien? president o'brien: i think i am just heard a very important point in the last part of what the speaker said, in the last sentence. i think they should definitely have that credited to the local company or debited to the benefit of the outside company to negate that, because that is an immediate not apples to apples comparison, so that needs

to be in there. their fees have to be credited because that has to be there. i would like to see that put forward. >> commissioner client? commissioner -- commissioner clyde? commissioner clyde: i want to be careful because there are companies that hire in san francisco and are outside of the border. in oakland. i just want to be a little bit careful of that. we are in a regional economy, and i just want to be careful with that. we are in a regional economy. we are not somehow more arduous because we live in san francisco. i do want to support the companies that are doing companies that are doing socially responsible private, socially responsible private,