HB3118 CD1

Report Title:

Corporations; Responsible Business Corporation Act

Description:

Establishes a task force to determine how to provide for incorporation of responsible companies that consider the public interest in doing business. (HB3118 CD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	3118
TWENTY-THIRD LEGISLATURE, 2006		H.D. 1
STATE OF HAWAII		S.D. 1
		C.D. 1

A BILL FOR AN ACT

RELATING TO CORPORATIONS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that corporations play an increasingly dominant role in our society. While they often provide important goods and services, in doing so they have the potential -- and sometimes the incentive -- to cause harm to workers, the environment, consumers, public health and safety, human rights, and the communities in which they operate. This occurs because the management of a corporation has a fiduciary duty to act in the best interest of the corporation, which is measured, for the most part, as maximizing profit for shareholders. Unfortunately, the interests of "stakeholder" constituencies that are deeply entwined with and affected by the corporation's activities, such as employees, consumers, creditors, the environment, and the local community, fall outside the corporate structure.

The legislature also finds that, to protect the interests of stakeholders and the public, the legislative response historically has been to draft a new law or regulation that responds to the harm caused by corporate conduct. Important legislation, including minimum wage requirements, labor laws protecting worker rights to unionize, environmental regulations, and consumer protection statutes, all establish standards for protecting fundamental public interest values and ensuring a safe and productive society. However, because the profit motive and duty to shareholders governs corporate decision-making, corporate decision-makers can be put in the challenging position of having their duty to maximize profit run at odds with societal interests, such as living wages and pensions for employees or a clean environment.

The legislature further finds that it is time to consider moving away from the regulatory approach to protecting the public interest by addressing the structural problems of the corporation that are at the heart of the tension between business and stakeholder interests. Creating an alternative corporate model that would integrate the interests of stakeholders and the public interest into the structure and duties of businesses would still allow corporations to generate profit for shareholders. Companies incorporating under this model would be required to have employee and public interest representatives on the board of directors. Further, directors of a such companies would evaluate the best interests of the corporation based on its financial performance, as well as the long- and short-term interests of employees, customers, the state and local economy, and community and general public interests. The structural incentives that, in the current model of corporate law, create tension between private and public interests would be transformed to align private and public interests.

The purpose of this Act is to establish a task force to determine how to authorize the establishment of corporations structured to recognize, as corporate interests, the interests of employees and of the public in areas such as wages, the environment, and consumer protection, and provide incentives for incorporation of responsible companies that not only consider the public interest in doing business but integrate the public interest into the structure and duties of the business.

SECTION 2. (a) There is established within the department of commerce and consumer affairs the responsible corporation task force.

(b) The responsible corporation task force shall include as members:

(1) The director of commerce and consumer affairs, or the director's designee, who shall serve as the chairperson;

(2) The commissioner of securities of the department of commerce and consumer affairs, or the commissioner's designee;

(3) The chair of the business law section of the Hawaii State Bar Association, or the chair's designee, and another member of the business law section to be designated by the President of the Hawaii State Bar Association;

(4) The dean of the William S. Richardson School of Law, or the dean's designee; and

(5) The dean of the school of business of the University of Hawaii, or the dean's designee, and a member of the faculty of the school of business as designated by the dean.

(1) Consider how best to authorize the establishment of corporations structured to recognize, as corporate interests, the interests of employees and of the public in areas such as wages, the environment, and consumer protection and provide incentives for incorporation of responsible companies that not only consider the public interest in doing business but integrate the public interest into the structure and duties of the business, including specific:

(A) Incentives for incorporation as a responsible corporation;

(B) Standards for determining whether the corporation will meet and continues to meet the requirements for receiving the incentives; and

(2) Use as a starting point in its deliberations, to the extent feasible, the intent and provisions of House Bill No. 3118, S.D.1, Regular Session of 2006;

(3) Conform provisions for the establishment and operation of these responsible corporations, to the extent feasible, to existing Hawaii law on corporations, including chapter 414, Hawaii Revised Statutes;

(4) Identify specific provisions of chapter 414, Hawaii Revised Statutes, that would not be applicable to the establishment and operation of these responsible corporations and specify in detail the alternative provisions that would apply in each instance;

(5) Identify the resources, including funding, necessary to implement registration of responsible business corporations; and

(6) Determine a timetable for the implementation of registration of responsible business corporations by the department of commerce and consumer affairs.

(d) The task force shall submit its findings and recommendations to the legislature, including proposed legislation, no later than twenty days prior to the convening of the regular session of 2007.

(e) The members of the task force shall serve without compensation but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

(f) The department of commerce and consumer affairs shall provide support services necessary to assist the task force in achieving its purposes under this Act.

(g) The task force shall cease to exist on June 30, 2007.

SECTION 3. This Act shall take effect upon its approval.