Creating New Laws with the Crowd

Published Jan-15-12

Breakthrough:
An open innovation contest that offers members of the public the chance to make new laws.

Company:
California State Assemblymember Jared Huffman, United States

The Story:

Most people at one time or another have thought that there should be laws and by-laws where none exist currently, or that aspects of the criminal code that are particularly irksome should be changed.

But you don’t have to be a member of the legislature to help create new laws, not when open innovation can give you a role. That’s the position for Californians who take part in the “There Ought to be a Law...or Not” competition, which in 2011, garnered 120 submissions.

Origin of Contest

This annual open innovation competition encourages the inputs of local residents into the creation of new laws. Its seeds were sewn several years ago when a number of constituents went to see Assemblyman Jared Huffman.

They had an idea for a new law that would require utility companies to pay residents with solar panels for any surplus electricity they produced. The bill was subsequently signed into law by Governor Arnold Schwarzenegger, and an idea for a competition was born.

“This contest is a way for me as a legislator to tap into that incredible resource of knowledge and creativity,” Assemblyman Huffman was quoted as saying in Watch Sonoma County. “It’s one of several ways I try to maintain a constant dialogue with my constituents about public policy.”

2011’s Big Winner

The competition attracts many impressive and creative submissions and in 2011 the overall winner was a suggestion for the creation of a new corporate category “benefit corporations”. This designation would be applied to companies that balance their social and environmental credentials with the necessity of creating a profit.

Under this proposed law “benefit companies” would be allowed extra leeway so that they would be able to put the needs of the community first without the threat of legal action from shareholders for not maximizing profits. The law that it would supplant requires corporations to put the financial interests of shareholders first, before those of workers, communities and the environment.

The proposal was put forward by Stuart Rudick founding partner of Mill Valley-based Mindful Investors, Trathen Heckman, founding director of Daily Acts in Petaluma; Jeff Kletter, CEO and co-founder of Kinesys in San Rafael; and Chris Mann, CEO of Guayaki Sustainable Rainforest Products in Sebastopol.

Immediate Action

Soon after announcing the winner Assemblyman Huffman went into action and proposed Assembly Bill 361, picking up a powerful ally on the way, Assemblyman Bob Blumenfield, D-Van Nuys,chair of the Assembly’s budget committee.

In May 2011 the Assembly Judiciary Committee approved the bill, and in October Governor Brown of California signed it into law. Its proponents believe that this now puts California at the leading edge of corporate social responsibility and that the new law is good news for business, investors and communities.

“AB 361 rolls out the welcome mat for businesses and investors ready to create high quality jobs in California and make economic and social contributions that will improve the quality of life in communities across to our state for years to come,” added Assemblyman Huffman.

The Benefit Corporations are identical to existing Californian corporations, but for three key differences:

1) A corporate purpose that creates a positive impact for society and the
environment
2) Fiduciary duty is redefined to consider interests of employees, society
and the environment
3) Present an annual report on social and environmental performance
using a credible third party standard

Open Innovation Gets Results

As well as creating a new law, this competition also demonstrated the speed with which open innovation can get results as the bill was passed into legislation within seven months of being chosen as the contest’s winning suggestion.

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