monitoring every six months for the first two years and an annual monitoring after that. the third recommendation addressed in the language are referred to oversight and monitoring and then director sparks pointed up the issue of wanting to make sure there were benefits accrued to san francisco and it essentially says if you are a benefit corp., you should not get a bid preference to beat out a san francisco business. but if there is no nonprofit or san francisco business in the pool, what makes sense is for a non-san francisco but if a corporation to receive a slight preference over non-san francisco cos. hopefully that addresses the concern. this is an area i have been working on for months now. i want to make sure the

committee is comfortable with what we are proposing. >> as we have worked on the legislation, it's difficult to get your hat around it and understand where it might make sense. no matter what we do, we can't easily have loosely say let's give a preference that it will translate to business for san francisco, but a big consideration for me as we try to tighten how we are spending our scarce dollars. with regards to the type of contracts it would cover, it sounds like it covers professional services and construction contracts. what happens where it is the purchase of commodities? >> i believe it would apply to that, but there are -- i am not aware of any benefit

corporations in that world right now. but we can certainly look into that. >> as we had conversations around that -- what could potentially happen is a gaming system where what you are encouraging is to have companies serve as middlemen to another vendor and they get to benefit of the margin of being the middleman because there is a bid preference. that is an area i would like to tighten the language around because of of going to buy pan from office depot and another corporation gets a bit preference because they are a community benefit and purchasing the same pen at office depot, why would we want to pay them the extra margin? it makes no sense. that's an area i would like us to explore a more and with regard to the community benefits

in terms of the recommendation to have a third party verification, that is something that is interesting and i would be interested to see that amendment go through. i'm not as familiar with the term about what does it mean to be a b corp. and is this something that gets applied internationally or san francisco local area al qaeda you are trying to get around that and say to prevent a non- san francisco business, it would not be able to displace eddie san francisco business but if we're really going to say that we want to provide -- rale man -- i just need to understand the definition better about the third party definition and how that relates back to benefiting the san francisco communities?

supervisor kim: i just want to follow up on my previous question. we had the about the the actual cost to the city for our construction contracts but it would be great to get that for all of our contracts to get a better sense of what the budgetary impact of these discounts are. i was also hoping to get more information on the third party verification. california is the only state that has established -- >> that is not true. california is the sixth state and there are a total of 15 states that have either passed are the process of passing legislation. >> i thought i had read that

california is the only state that does not have a third party verification. >> that is true. >> to other states have a model that it -- what would be the process to establish that? we do it before we give discounts? >> there might be one are two of them here. benefit corporations are required under state law to provide an annual accounting and auditing of their benefits to the committee. but these third party standards are separate auditor's that look at it to make sure folks are in compliance with benefit corporations. an amendment i have suggested is to provide oversight of the

third-party their fires and they would be required to have proof they are verified under the third party to show they are actually contract -- it would be up to them to do that. >> would weasel out prior to the discount taking effect or would we start utilizing the discount and have worrier to come up with a third party verification? >> one of the amendments we of made requires a benefit corporation actually be a benefit corp. for six months a little lead times a week to get ahead of it. >> thank you. it's important when a company is competing with other companies outside the city that we are able to give a discount if they are providing low income

communities or providing opportunities beyond the creation of jobs and i think this ordinance is an important step but i'm curious about some of the other things we will do to implement that. supervisor chu: thank you. just in terms of the definition, just understand that you have got corporations that might be benefit communities and different ways. but is there or -- is there a certain percentage of the profit that goes to benefit communities or is it just 1% would suffice that -- i don't understand the definition. >> there are a number of folks from the benefit corporation world war here and i would like if in your public comment you might be able to address this. different corporations provide different benefits in different ways. some have benefits like green

collar jobs or hire individuals that have been traditionally challenged. others have sustainability practices and the metrics are very different. the thing that is common to all of them is that there are measurable community benefits documented in annual reports and the case that will be on this legislation and verified by third parties that the standards are not meaningless. >> thank you. supervisor avalos: this is interesting legislation. i remember last year, i was very intrigued by it and there have been some great opportunities to give business models here in san francisco. i don't know how long it's going to take -- my question is along the lines -- what really makes

-- can wells fargo be called a b corporation for providing certain benefits to people in the bay area? is that something they can benefit from? i'm trying to get a sense of how and corporation happens and what are the thresholds for that to happen. you could have a subsidiary of your major corporation. i don't necessarily think those benefits are as strong as they could be. chevron has extracted oil and places that are very politically challenged -- because they're doing good work somewhere else -- these are

questions i have. >> these are all very valid questions. the thing that is important to remember is that for a corporation to reclassify themselves as a benefit corporation, they need to change their bylaws to state their bottom line is just not about profit. for a typical corporation, the type of examples you gave like bank of america and wells fargo, those companies, their directors and shareholders would not allow that change within the corporate bylaws to permit the expenditure of revenues for things that don't go directly to profits. we are encouraging companies to have a commitment to social benefits in the broader community.

the level of accountability and transparency around as corporate purpose are pretty significant. you need to have annual reports that demonstrate what you are doing with regard to various standards and as we said before, there are a third party standards to assure these companies are doing something real as opposed to something for of brainwashing or marketing purposes. it's a valid question and one i know third-party validated are focused on because they are concerned about wanting to make sure the company classifies itself as a benefit corporation they are actually providing a benefit. >> -- supervisor avalos: that sounds interesting. i'm just wondering -- i don't know much about the construction of corporations. is there a way for a corporation

like chevron, having a subsidiary under chevron that could even be called chevron that is a public benefit corporation and is that something we can see or is it a structure that could exist that would benefit from this legislation? if that is the case, there's a flaw in the overall legislation. >> of the top of my head, i don't know the specific answer to your question. i suspect this has been contemplated before. supervisor chu: i have one final comment. part of the amendment being proposed is to make sure there's

a benefit corporation that would get discount it would not pump -- would not bump the other. the question of how we are accomplishing that. that is one way of addressing it, but i think there is another question i have which is being an additive discount is a significant one and i want to clarify what that means. if you are a be corp. and get a discount, you are a joint venture or whatever, the discount could go as high as 14% which is substantial. i want to get clarity on that because i'm not sure how that work. >> this part of the complexity of this legislation, but we

specifically stripped out the active portion. there were two places where it could happen. we said there was an additive 4% and we have eliminated the latter category. it was confusing and with regard to the other piece, when you actually get the benefit discount, the 8% is now 4% and the language says you only get the 4% if as long as it doesn't adversely impact the award process for nonprofit bidders. >> what was the reason we came

to 4%? >> there were a number of people who thought the preference was too high so the idea was to provide some level of benefit but not 8%. that should reduce if there is a longer-term impact for total expenses and budgetary impact, that should reduce the impact. >> is there a reason we do not want to go lower than 4%? >> it is a conversation to half. if you reduce it to much, you lose the impact. part of the reason i want to do this is i think we should put a marker and signal to the marketplace that we want benefit

corporations to come here and do business here in san francisco. the city of philadelphia provided trap -- provided tax breaks and now philadelphia is a place for benefit corporations are starting to flock. these are the kind of companies we want to encourage in the bay area and given the questions around twitter and stock options last year, if we went down this route like philadelphia, it would create a lot of questions but i was hoping to avoid the large controversy we had by focusing on contracts. >> why don't we open this item up for public comment? are there members of the public who wish to speak? if there are other members who would like to speak, please line up on the center aisle. >> this is a very interesting

conversation. i had a nonprofit and so we analyzed our situation because of the various opportunities in this city and our nonprofit got an addition to our name to do professional services and i see here where there is no real empirical data and this is how i want to address it. i want to know the number of primes that do business and san francisco and what their profit is. there are a number oflbes that do business in san francisco and i want to know what their profit is.

i want to know how they are paid. how did they do that job and when are they paid. that is very critical. what i see here, as often happens when it comes to the human rights commission, you can come out with something that is new, but who has the expertise and clout to do the checking? it is very convoluted. one of view supervisors has brought in a bigger corporation that can do this and pay the most control and get yourself a corporation and if you have a third party that takes professional fees, they can certify you in a jiffy. [tone]

this is a hindrance to them -- they are already suffering in san francisco. >> i'm with the american sustainable business council. i want to address a couple of points that seem to come up. one is about the specificity of what is committed to in the other is about the enforcement process. there has been a lot of questions about that. organizations need to be specific in terms of what they are committing to in terms of the public benefit, whether they be involved and health-care or compensation levels for the environmental cleanup and mitigation or anything else that might relate to a public and community benefit. they have to express this in writing and they have to be equitable for it. then there is the verification process and most of them pose a requirement there be some sort

of direct audit. it's not just the question of taking the company's word for it. we ask companies to go on record and do the right thing and they are exposed through public findings and an inspection process to make sure they do the right thing and the board, if it wants to tighten up further, could add the specification that only certain third-party verify heirs are allowed and that would give even more ability to restrict the process and make sure the practices are followed. i cannot imagine in a city like this that people would short cut it because there are multiple ways to get embarrassed in the public and i if they mistreat this prerogative. >> could you address the question around whether it would be possible for a subsidiary of chevron or some other company that may not have the best

record on the community or environmental impact? >> i have not studied the specific legal questions of that. but i will technical answer and a practical answer. if a company wanted to create a subsidiary that would be bound by these provisions, it would have the ability to do so and the entity would be obligated to be a of differently if they did not. if chevron wanted to commit to having them behave differently, they could do that but the practical answer is the companies are not going to do that because they do not want to expose themselves to that kind of scrutiny. i don't think it will come up as a practical issue. >> i'm very supportive -- we

have shell energy with a track record around the world that is pretty mixed. there is a huge demand of -- for a while and they have worked in places where there is great political turmoil and have been implicated in some of the turmoil that is there. we have a subsidiary of shell that will be providing clean energy for san francisco. they actually have their benefit and they are probably making a profit am providing a public benefit around clean energy which is something i think we should promote but the bottom line is probably profit- making in that regard. is that a situation where we

could have a subsidiary of a major corporation that is about many things? >> i cannot address that specific one. i would be pleased to research this further and get a response back to you on this particular question. i understand its importance. >> thank you. next member of the public would like to speak on this item, please come forward. >> i am the new ceo of the california association of california nonprofits working to support communities by sponsoring nonprofit

organizations. we're moving our headquarters to san francisco, but not because we are getting a tax benefit. i am here to present our strong opposition to the discount ordnance on the grounds that without any evidence it would provide a benefit to san francisco, it gives a unwarranted privileges to a special class of private business interests and at its expense of complexity to an already extensive, complex system we have family san francisco. there has never been a finding these corporations are disadvantaged in any way as might be the case with minority-owned businesses, women-owned businesses, and other businesses that receive particular special advantages. under the new california benefits corporation law, for- profit companies can form that do 2 things. they must promise to do public good and they are allowed to take into consideration think

the other than profit when making decisions. they are not required to make decisions based on other than profit. they're allowed to do so if they wish. california state law provides no mandates for how to define what benefit is or what making a decision for a consideration other than what profit is. all run the country now, large corporations are forming small, benefit corporations exactly as you described, to take advantage of tax benefits and other items that may be accruing although there are no places in california that gives such benefits to them. [tone] you can get a benefit -- and still qualify for it while

benefiting -- >> thank you. if you like to submit your comments to the committee, we can take that information. >> thank you. >> thank you for the opportunity to express my support for this legislation. i serve as the vice president of the board of the green chamber of commerce car representing hundreds of locals of businesses. i have a portfolio over 2000 small businesses in the bay area and we operate as a cream company, giving back 10% of our gross profits. so this differentiates us from our competitors and makes us attractive to our clients. we became a benefit corporation to legally recognize and protect this commitment to the community. i know in the merchant services

industry, there is no buyer that would hold us to giving back 10% of our gross profit. that's why this is important. i support this for three reasons. one is that it's a strong statement by the city that the city considers the community and environment to be important with regard to business operations. this is a in alignment with the city's downtown growing a green economy. san francisco will be seen as a great place to operate businesses. third, this will encourage more businesses to consider the environment in their operations and be recognized by an independent third party for an authentic meant in those areas. >> thank you. are there other speakers who wish to comment on this item? >> i am be president of give something back. we are one of the first benefit

corporations. i would love to comment on the technical issues which are really important, but i think it is valuable for san francisco to be in the forefront of recognizing the dimensions of this movement of community activists who are using the competitive power of business to create benefits for community. benefit accrues to the community, not the business. this has been building for 20 years and there are hundreds of companies that now have the opportunity to protect their social mission. we donate 100% of our profits serving customers like san francisco and also serve the people of san francisco, so this is an opportunity to be one of the first to identify that something has happened in the community to cause people to

connect the power of business. there is very little cost to the community. 4% is the maximum and we would have to bid for% more than staples on the office supply business which was due yesterday. that would be very unlikely for us to do. i strongly recommend the city and county be first to recognize the importance of this social movement. >> thank you. are there other members of the public who wish to speak on this item? >> i am the president and co- founder of better world telecom and we just moved to market street and are contemplating moving our headquarters as well. i think we would follow some of the interesting