State can help align profit, public interest
By Rep. Marcus Oshiro
History is full of dreamers with ideas who were once laughed at. But they forged ahead anyway and went on to change the world. The Advertiser's editorial of March 29, calling the Responsible Business Corporation Act silly, was rather quick to pass judgment without fully understanding the intent and potential of House Bill 3118. I believe this is one of those ideas that will change the way business defines success, creating a public benefit that is far greater than government could ever achieve by itself.
To start, a "Responsible Business Corporation" is far more than a business doing good deeds for the community; it is a legal hybrid between a traditional for-profit corporation and a not-for-profit corporation. It can issue stock, generate profit for its shareholders and meet its fiduciary duties under the business judgment rule. But, it could also consider the interests of its employees, suppliers, consumers and the community in which the company operates.
A September 2000 Business Week/Harris poll revealed that 95 percent of Americans believe that corporations owe something to their workers and communities in which they do business.
There is a growing trend among investors called Socially Responsible Investing, or SRI. Investors are looking for companies that care about the world in addition to caring about bottom lines and shareholder profits. Through their investments, they are saying that these companies should be rewarded for their conscience. The Responsible Business Corporation Act would provide a business model for such companies.
As Karen Bouris, the publisher for Inner Ocean Publishing on Maui, said in her supportive testimony, "I strongly believe that the Responsible Business Corporation Act would give us, and others, access to clear guidelines and incentives that would provide long-term benefits for our company and Hawai'i."
Sadly, the term "responsible corporation" has become an oxymoron in society today. Corporation directors are charged with one fiduciary goal: to make a profit for their shareholders. While many businesses are great at making profits, it is sometimes at the expense of the employee and the public at large. Chasing the dollar, corporations such as Enron and WorldCom violated the public's trust and crippled our nation's financial markets.
Granted, the great majority of corporations are law-abiding, but integrating public benefit into their bottom-line profits is not something most companies do voluntarily. In fact, most companies cannot do so under current corporate law. The Responsible Business Act gives them the latitude to do well for both the bottom line and the general public and gives shareholders the opportunity to become stakeholders in building a better community.
The "responsible corporation" also puts community members and employees into decision-making roles within the business. Many businesses have found that morale and job satisfaction are greatly increased by giving the employees a chance to guide and direct the company. Community members are also in the best position to determine the needs of the community and how the company might play a role in helping to improve local conditions.
Let's think bigger about the ramifications of this tax incentive. It's not simply about giving companies a tax break for good corporate citizenship, something they should be doing on their own. The Responsible Business Corporation Act allows businesses with the public interest at heart to have a corporate structure designed specifically for them. It recognizes businesses that have a proven track record of giving back to the community, and it is not a give-away.
If Hawai'i becomes the first state in the country to incorporate responsible business corporations, this would be the catalyst to locally develop legal, financial and investing expertise that will service these corporations. Hawai'i can become a leader in developing the responsible business corporation industry, just as Delaware once sought to court America's premier corporations by offering progressive and flexible state laws; today more than half of the Fortune 500 are incorporated in the state of Delaware.
This is similar to what happened in 1987 when Hawai'i became the first state to establish a captive insurance industry. Who could have imagined that nearly 20 years later, Hawai'i would be one of the captive insurance leaders in our country, with $741 million deposited in our local banks, stimulating $10.5 million in economic activity in the state annually?
I'm hopeful about the potential of this legislation. Government has its role in serving the public interest, but it is apparent that unless the 20th century laws of corporate governance and responsibility are changed, the public's interest will always be shortchanged and marginalized.
Robert Kennedy said it best: "There are those who look at things the way they are, and ask why. I dream of things that never were, and ask why not?" The Responsible Business Corporation Act allows us to shift our thinking, envision a new model and unshackle the humanity within our corporate boards of directors. It is ignoble servitude to merely pursue profit over conscience, morality and the common good. Indeed, profit and public interest need not be mutually exclusive, and both mammon and man can be served.
State Rep. Marcus R. Oshiro (D-39th) represents the Wahiawa, Whitmore Village, Poamoho areas. He wrote this commentary for The Advertiser.