It’s The Worst Business Law Ever

Jerry Coffee
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Wednesday - April 12, 2006
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I know, I know - it’s easier to tear down someone else’s idea or solution to a problem than it is to come up with your own.

But some ideas are such fat pitches - especially when they are a “solution” to a non-problem - ya just have to take a swing!

Such is the case with House Bill 3118, the “Responsible Business Corporation Act,” initiated by two lawyers who I’d bet never had to make a payroll and an ex-businessman who should know better - state Reps. Marcus Oshiro, Jon Riki Karamatsu and Robert Herkes.

An editorial in a local daily newspaper that endorsed for reelection more than 90 percent of the incumbent legislators - including these three - called the bill downright “silly.”

Actually, they were being kind. The bill is stupid and insulting!

These three legislators, in initiating the Responsible Business Corporation Act, apparently think Hawaii’s business men and women are not responsible enough (would that be irresponsible?), and that they can be “carrot and sticked” into responsibility by a corporate tax credit of undetermined percentage. To qualify for such a credit, the “window dressing” of responsibility would require the corporate board of directors to reflect representation of all the corporation’s “stake-holders” i.e. shareholders, employees, customers, suppliers and/or creditors. This would apply to corporations with three or more directors.

The bill specifies at least 20 percent of the board of directors be nominated and elected by the employees to “represent and advocate” for the employees, and at least another 20 percent be elected by the other members of the board to “represent and advocate” for the public interest. The bill does not define “public interest.” The bill also ensures that all stakeholder representatives on the board have full access to all of the corporation’s records. One can only imagine the conflicting interests on such a board that would make profits secondary.

Uh oh! There’s that dirty word: “profit.”

And speaking of profit, a particularly insidious caveat is tucked into the bill which would exempt this patchwork board from the legal requirement of “acting solely in the interest of shareholders by maximizing the corporation’s short and long term profits.”

In defending his bill, Oshiro makes too much of the aberrational, though inexcusable, behavior of the “Enrons” and “World Coms,” and he’s flat-out wrong in saying the term “responsible corporation” has become an oxy-moron today. He envisions this “responsible” corporation as “a legal hybrid between a traditional for-profit corporation and a notfor-profit corporation ... it could also consider the interests of its employees, suppliers, consumers and the community in which it operates.”

Duh, Marcus! What corporation seeking profit in a competitive economic environment doesn’t already consider all these interests?

Anyone with half a business brain knows the most socially responsible thing a corporation can do is maximize profits. Higher profits mean more tax income to fill government coffers for education, social, cultural and environmental programs. Higher profits mean growth, growth means more jobs, more jobs mean healthier economy and society, and higher standards of living, leading to more consumer spending bringing even more business growth and more jobs.

The generation of economic profit is the closest thing we have to a perpetual motion machine; it fuels its own progress and growth. For some legislators, in their arrogant presumption that Hawaii’s businesses aren’t socially responsible enough, to introduce legislation undermining the profit motive would be the most socially irresponsible thing they could do.

The fact is, the generosity of Hawaii’s business community in the support of non-profit organizations is far more than just “responsible.” Millions of dollars each year are directed from the corporate sector - from both the corporations and their employees - to social, cultural, healthcare, youth, environmental, religious and charitable non-profits in our state. Hundreds of Hawaii’s business leaders give their time and expertise on the boards of these non-profit organizations as well. Hawaii’s corporations also donate to disaster relief such as for Hurricane Katrina, the South Asian tsunami and the recent mud slides in the Philippines.

Given the usual legislative loose ends on issues critical to our state, Oshiro and his Dem cohorts would do well to leave alone the things that ain’t broke and focus on the things that are.

How about a “Responsible Legislature Act” for starters?

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