Report Title:

Corporations; Responsible Business Corporation Act

Description:

Authorizes the incorporation of companies under the proposed Responsible Business Corporation Act for corporations that consider the public interest in doing business. (HB3118 SD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

3118

TWENTY-THIRD LEGISLATURE, 2006

H.D. 1

STATE OF HAWAII

S.D. 1


 

A BILL FOR AN ACT

 

relating to corporations.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

RESPONSIBLE BUSINESS CORPORATION ACT

§ -1 Short title. This chapter may be cited as the "Responsible Business Corporation Act".

§ -2 Definitions. As used in this chapter:

"Public interest" means the general public well-being, including but not limited to present and future generations, the economy, natural environment, public health, public safety, human rights, educational and other human developmental opportunities, and the general well-being of the local, state, national, or world community.

"Stakeholder" means:

(1) A shareholder;

(2) An employee;

(3) A customer;

(4) A supplier; or

(5) A creditor.

§ -3 Relationship to other law. This chapter applies to corporations incorporated or regulated under this chapter, except as otherwise provided in this chapter, or where the Hawaii Business Corporation Act under chapter 414 conflicts with this chapter.

§ -4 Incorporation. (a) A corporation may incorporate under this chapter for any business purpose or purposes, unless incorporation is contrary to chapter 414; provided that, unless otherwise provided in its articles, a corporation has a general business purpose.

(b) A corporation incorporated under this chapter shall have articles of incorporation that provide that its business purpose or purposes shall be carried out in compliance with this chapter.

(c) The director of commerce and consumer affairs shall maintain its incorporation records in a manner that clearly distinguishes corporations incorporated under this chapter.

§ -5 Standard of conduct; directors. (a) A director shall discharge the duties of the position of director:

(1) In good faith;

(2) In a manner the director reasonably believes to be in the best interests of the corporation, consistent with this chapter; and

(3) With the care an ordinarily prudent person in a like position would exercise under similar circumstances.

(b) A director who performs duties in the manner prescribed under subsection (a) shall not be liable by reason of being or having been a director of the corporation.

(c) Nothing in this chapter creates liability to, or a cause of action in favor of, a person other than the corporation or a shareholder.

(d) A director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by:

(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(2) Counsel, public accountants, or other persons as to matters that the director reasonably believes are within the person's professional or expert competence; or

(3) A committee of the board of directors upon which the director does not serve, as to matters within its designated authority, if the director reasonably believes the committee.

(e) Subsection (d) shall not apply to a director who has knowledge concerning the matter in question that makes the reliance otherwise permitted by subsection (d) unwarranted.

(f) A director who is present at a meeting of the board of directors when an action is approved by the affirmative vote of a majority of the directors present, is presumed to have assented to the action approved, unless the director:

(1) Objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and the director does not participate thereafter in the meeting, in which case the director shall not be considered to be present at the meeting for any purpose of this chapter;

(2) Votes against the action at the meeting; or

(3) Is otherwise prohibited by this chapter from voting on the action.

(g) A director's personal liability to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director may be eliminated or limited in the corporation's articles of incorporation. The articles shall not eliminate or limit the liability of a director for:

(1) Any breach of the director's duty of loyalty to the corporation or its shareholders;

(2) Acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

(3) Any transaction from which the director derived an improper personal benefit; or

(4) Any act or omission occurring prior to the date when the provision in the articles of incorporation eliminating or limiting liability became effective.

(h) In determining the best interests of the corporation, a director shall consider:

(1) The interests of the corporation's shareholders, employees, customers, suppliers, and creditors;

(2) The economy of the State and nation and community and societal considerations, including the public interest; and

(3) The long-term and short-term interests of the corporation and its stakeholders, including the possibility that these interests may be best served by the continued independence of the corporation.

A director is not required to give priority to any consideration referenced in this subsection over any other consideration.

§ -6 Directors; representation of stakeholder interests. (a) A corporation operating under this chapter shall include directors whose role as directors includes representation of, and advocacy for, the interests of the corporation's employees and of the public interest.

(b) At least twenty per cent of the corporation's directors shall represent and advocate for the corporation's employees. These directors shall be nominated and elected by the employees.

(c) At least twenty per cent of the corporation's directors shall represent and advocate for the public interest. These directors shall be elected by the other board members, after seeking input from persons or groups representing the public interest.

(d) If a corporation has only one or two directors, the director or directors may be elected solely by the shareholders.

(e) If a corporation has three directors, the bylaws shall provide that one director shall be elected to represent the employees or the public interest. That director shall be nominated and elected pursuant to this chapter.

(f) The designation of certain directors as representatives of, and advocates for, employees or the public interest shall not affect the duty of other directors to consider those interests, or the duty of designated directors to consider the interests of other stakeholders.

(g) A corporation, in its articles or bylaws, may state a priority for a particular component of the public interest.

§ -7 Standard of conduct; officers. (a) An officer shall discharge the officer's duties in good faith, in a manner the officer reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A person exercising the principal functions of an office, or to whom some or all of the duties and powers of an office are delegated, is deemed an officer for purposes of this section.

(b) In determining the best interests of the corporation, an officer shall consider the factors in section    -5(h).

(c) Nothing in this section shall create liability to, or a cause of action in favor of, a person other than the corporation or a shareholder.

§ -8 Law of agency; applicability limited. The law of agency shall not apply to a corporation under this chapter, to the extent that the law of agency requires that the officers and directors act solely in the interests of shareholders by maximizing the corporation's long-term or short-term profits.

§ -9 Input and accountability to considerations other than shareholder interests. (a) The board of directors shall provide opportunities for advisory input from stakeholders other than shareholders, such as regular stakeholder meetings scheduled by the board or a website or e-mail list provided by the corporation for communication among those stakeholders and between those stakeholders and the officers and directors.

(b) If the corporation's shares are publicly traded under the federal Securities and Exchange Act of 1933, the corporation shall produce and publish an annual public interest report at the same time as it files its annual financial report required under federal securities laws. The public interest report shall summarize the corporation's actions undertaken within the preceding year that benefit stakeholders other than shareholders and the public interest.

(c) The corporation shall provide educational programs for its officers, directors, and other employees, regarding their special duties under this chapter to all of the corporation's stakeholders and to the public interest. The corporation shall provide the education to new officers, directors, and other employees at the earliest reasonable opportunity."

SECTION 2. This Act shall take effect on July 1, 2050.