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The Honolulu Advertiser
Posted on: Saturday, March 25, 2006

Bill would reward responsible businesses

By Sean Hao
Advertiser Staff Writer

HOUSE SPONSORS

Rep. Marcus Oshiro, 586-8505

Rep. Jon Riki Karamatsu, 586-8490

Rep. Robert Herkes, 586-8400

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State lawmakers are looking to give businesses an incentive to be more "responsible."

A Senate committee this week approved a bill that would exempt responsible businesses from an as-yet unspecified percentage of state corporate taxes. To qualify, these businesses would have to incorporate under a proposed Responsible Business Corporation Act.

That includes complying with several corporate governance regulations aimed at getting companies to consider the public's interest when doing business. Under House Bill 3118, responsible corporations will advocate for the public in matters relating to the economy, public health, human rights and the natural environment, among other things.

The bill is an attempt to use tax breaks to make corporations responsive not just to the interests of shareholders, but to their employees and the communities in which they do business.

"It's incentivizing companies to be role models and good corporate citizens," said bill co-sponsor Rep. Jon Riki Karamatsu, chairman of the House Economic Development and Business Concerns Committee.

A "responsible" company, according to the bill, would:

  • Allow employees to nominate and elect at least 20 percent of the company directors. These directors would advocate for employees.

  • Designate another 20 percent of directors to advocate for the public interest. They would be elected by other board members.

  • Produce an annual public interest report summarizing actions that benefited people other than shareholders, if the company is publicly traded.

    Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i, said the bill seems to reward companies for doing what they already should be doing óbeing responsible corporate citizens.

    "Why are we rewarding people just because they are responsible?" Kalapa asked. "We would hope all businesses are responsible. Hopefully one of the demonstrations of a good, responsible corporate citizen is to pay one's fair share of the tax burden."

    In addition, state and federal laws already exist to deal with unethical companies, Kalapa said. For example, the Sarbanne-Oxley Act, which makes business leaders personally liable for accounting fraud, was created in response to ethical lapses at corporations such as Worldcom and Enron.

    The bill was approved unanimously by the Committee on Commerce, Consumer Protection and Housing on Wednesday and now goes to the Committee on Ways and Means.

    Reach Sean Hao at shao@honoluluadvertiser.com.