Legislature(2001 - 2002)
02/27/2002 03:25 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 27, 2002
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 393
"An Act relating to unfair and deceptive trade practices and to
the sale of business opportunities; amending Rules 4 and 73,
Alaska Rules of Civil Procedure; and providing for an effective
date."
- MOVED HB 393 OUT OF COMMITTEE
HOUSE BILL NO. 377
"An Act relating to the establishment of an additional
southcentral panel to the Alaska Workers' Compensation Board and
to appointments to that panel; and providing for an effective
date."
- MOVED HB 377 OUT OF COMMITTEE
HOUSE BILL NO. 418
"An Act amending the Alaska Corporations Code as it relates to
delivery of annual reports, notice of shareholders' meetings,
proxy statements, and other information to shareholders, and
providing for electronic proxy voting."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 393
SHORT TITLE:SALES OF BUSINESS OPPORTUNITIES
SPONSOR(S): REPRESENTATIVE(S)STEVENS
Jrn-Date Jrn-Page Action
02/08/02 2182 (H) READ THE FIRST TIME -
REFERRALS
02/08/02 2182 (H) L&C, JUD
02/25/02 (H) L&C AT 3:15 PM CAPITOL 17
02/25/02 (H) Heard & Held
MINUTE(L&C)
02/27/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 377
SHORT TITLE:WORKERS' COMPENSATION BOARD PANELS
SPONSOR(S): REPRESENTATIVE(S)HARRIS
Jrn-Date Jrn-Page Action
02/01/02 2122 (H) READ THE FIRST TIME -
REFERRALS
02/01/02 2122 (H) L&C, FIN
02/27/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 418
SHORT TITLE:ELECTRONIC PROXY VOTING & NOTIFICATION
SPONSOR(S): LABOR & COMMERCE BY REQUEST
Jrn-Date Jrn-Page Action
02/13/02 2242 (H) READ THE FIRST TIME -
REFERRALS
02/13/02 2242 (H) L&C
02/27/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE GARY STEVENS
Alaska State Legislature
Capitol Building, Room 428
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HB 393 and
answered questions.
JULIA COSTER, Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department of Law
1031 West 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Answered questions regarding HB 393.
JOHN MANLY, Staff
to Representative John Harris
Alaska State Legislature
Capitol Building, Room 513
Juneau, Alaska 99801
POSITION STATEMENT: Presented HB 377 on behalf of
Representative Harris, sponsor, and answered questions.
PAUL GROSSI, Director
Division of Workers' Compensation
Department of Labor & Workforce Development
PO Box 25512
Juneau, Alaska 99802-5512
POSITION STATEMENT: Answered questions relating to HB 377.
AMY ERICKSON, Staff
to Representative Lisa Murkowski
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Presented HB 418 on behalf of the House
Labor and Commerce Standing Committee.
BUDD SIMPSON, Attorney
Simpson Tillinghast Sorensen & Longenbaugh
One Sealaska Plaza, Suite 300
Juneau, Alaska
POSITION STATEMENT: Testified on HB 418 on behalf of Sealaska
Corporation.
TERRY ELDER, Director
Division of Banking, Securities & Corporations
Department of Community and Economic Development
PO Box 110807
Juneau, Alaska 99811-0807
POSITION STATEMENT: Testified and answered questions on HB 418.
ACTION NARRATIVE
TAPE 02-25, SIDE A
Number 001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m.
Representatives Murkowski, Kott, Rokeberg, Crawford, and Hayes
were present at the call to order. Representatives Halcro and
Meyer arrived as the meeting was in progress.
HB 393-SALES OF BUSINESS OPPORTUNITIES
Number 026
CHAIR MURKOWSKI announced that the first order of business would
be HOUSE BILL NO. 393, "An Act relating to unfair and deceptive
trade practices and to the sale of business opportunities;
amending Rules 4 and 73, Alaska Rules of Civil Procedure; and
providing for an effective date."
CHAIR MURKOWSKI noted that public testimony was closed after the
last hearing. She had indicated then that she had some concerns
with regard to the definition of business opportunity; that
concern stemmed from the letter in members' packets dated
February 21, 2002, from Bryan Harrison at Alticor, relating to
the Direct Selling Association's request for an amendment that
would do two things: put a higher threshold in the exemption
category, and include that higher threshold within the
definition of business opportunity. She expressed concern about
requiring a relatively substantial bond and the registration and
regulation on smaller, legitimate enterprises such as Amway.
CHAIR MURKOWSKI indicated she'd been informed by the Department
of Law that these Direct Selling Association entities would be
covered under the exemption, but said it wasn't clear what
raising the threshold would do. She asked Representative
Stevens to update the committee on this issue.
Number 061
REPRESENTATIVE GARY STEVENS, Alaska State Legislature, sponsor
of HB 393, responded, "You're absolutely right." He referred to
exemption (5) on page 12, lines 28-30, which read:
(5) sales demonstration equipment, materials, or
samples for use in sales demonstrations and not for
resale, or product inventory sold to the buyer at a
bona fide wholesale price;
REPRESENTATIVE STEVENS offered that this exemption covers all
the legitimate organizations that Representative Murkowski was
concerned about, such as Amway, Avon, or Mary Kay. He explained
that [HB 393] would allow legitimate businesses to continue
operating, and also tries to protect those people who might get
caught up in some kind of consumer fraud. In regard to the
dollar amount, he expressed a preference for keeping it where it
is and not raising it too high. The goal is to protect people
from being fraudulently treated and still allow legitimate
businesses to continue operation.
Number 088
CHAIR MURKOWSKI recalled that at the last hearing, she'd
indicated she would try to contact some of these entities to
find out if someone has to pay an upfront cost to get the
product - not to get the product itself necessarily, but to
become an Amway distributor, for example. She reported her
understanding that those upfront costs are relatively minimal.
She voiced that this goes back to exemption (5). Because they
sell this product inventory, they will be covered under that.
CHAIR MURKOWSKI referred to the threshold in exemption (1) [page
12] and suggested that entities or individuals offering this
perhaps-questionable business opportunity - so long as they keep
it under $200 - could continue to "slip through the cracks and
conduct their scams." She said there is just no way to get to
them. She recalled testimony that this is "kind of a de minimis
level" and suggested it is above the $200 threshold that
oversight should be ensured.
Number 114
REPRESENTATIVE STEVENS agreed $200 is a fairly small amount, and
said if that amount were lowered, it would be "enormously hard
to police." The real problem for those people around the
country who have lost thousands of dollars is trying to protect
against such fraud.
CHAIR MURKOWSKI noted that Representative Stevens had cleared up
the problem she'd had with the definition and the threshold.
Number 132
REPRESENTATIVE ROKEBERG commented that he is uncomfortable
leaving the $200 threshold in there. He said he isn't concerned
with dropping below that threshold, but would rather see it
raised. He referred to a letter from Alticor that recommends a
$500 threshold. He asked Representative Stevens why a threshold
of $200 is better than $500.
REPRESENTATIVE STEVENS replied that it is a policy call. He
asked, "How far do we want to go in protecting the public?" He
offered that he doesn't know the answer. He said, "It just
seems that we can protect people at a certain level. It's a
compromise, I think, to come to $200, but I think that was the
figure we felt was correct." He offered that the question might
be better answered by Cindy Drinkwater or Julia [Coster] who
were online and had done some study on this issue.
REPRESENTATIVE ROKEBERG referred to some software that was $459
to basically start a business. He asked, "They had to have that
software?"
Number 163
REPRESENTATIVE STEVENS responded in the affirmative, and said if
one looks at these "horror stories" of various people getting
caught up in these [fraudulent] systems, they truly spent a lot
more than the "$200 level or even the $500 level." These
[fraudulent business opportunities] have been very costly to
people.
REPRESENTATIVE ROKEBERG suggested this is the problem. He
asked: If someone spent a lot more than $200 or $500, then
what's wrong with the $500 threshold?
REPRESENTATIVE STEVENS responded that this is "a question of how
far do you want to go in protecting the public." He said he
can't imagine a legitimate business being concerned about this
[threshold]; rather, illegitimate businesses that are taking
advantage of people need to be stopped. He added, "I don't
think you'll find legitimate businesses that would say $200 is
the wrong figure and $500 is the right figure."
CHAIR MURKOWSKI offered that maybe "the hammer" with [HB 393] is
that Alaska has something in place to keep track of the
legitimate operators through the registration process. She said
this might make illegitimate operators think twice about
advertising their scams in Alaska because they are being watched
closely. Currently, nobody is watching these operations other
than reading the classifieds and trying to follow through.
Number 193
REPRESENTATIVE STEVENS agreed with Representative Murkowski and
said, "And we can't find them." After the fact, it's pretty
hard for law enforcement to locate these [illegitimate]
companies because they don't have a permanent address or any
officers that one can find. He offered that he thinks the
registration process will do the majority of the job to find out
who these operators are and how to contact them. He added,
"It'll allow us to follow through." He explained that this is
an attempt to prevent [any dispute] before it goes to the final
step of trying to enforce the law, a much more expensive step.
Number 207
REPRESENTATIVE ROKEBERG asked if sellers of franchises are
exempt.
REPRESENTATIVE STEVENS responded in the affirmative and
explained that they are covered under exemption (2) [page 12].
CHAIR MURKOWSKI mentioned that she had in her notes that the
Federal Trade Commission (FTC) franchise rule has a $500 limit.
She asked Ms. Coster to address this issue.
Number 216
JULIA COSTER, Assistant Attorney General, Fair Business
Practices Section, Civil Division (Anchorage), Department of
Law, testified via teleconference. She explained that a
franchise rule administered by the FTC is similar to [HB 393],
but doesn't require registration. It requires the types of
disclosures required under [HB 393], and the limit is $500.
CHAIR MURKOWSKI asked why [HB 393] has a $200 threshold when the
federal threshold is $500.
MS. COSTER explained that many states that have registration
laws similar to what [HB 393] is proposing have found that a
large number of scams fall under the $500 level to avoid being
affected by the $500 threshold. Having communicated with these
states, Ms. Coster said they all urged [Alaska] to keep [the
threshold] as low as possible, as a preventative measure for the
scams under $500. She conveyed the hope of picking those scams
up by having the lower level.
Number 241
CHAIR MURKOWSKI asked if she is understanding exemption (2)
correctly, that if [a business opportunity is] a franchise, then
it will be governed under the FTC limit. So even if there is an
Alaskan exemption that says the threshold is $200, the threshold
is $500 for a franchise.
MS. COSTER said that is correct. She offered that it may be a
business opportunity and not a franchise, so it wouldn't
necessarily fall under the FTC's rule. She explained, "The
franchise rule has a slightly different definition because it
does govern franchises as opposed to just business
opportunities."
Number 251
REPRESENTATIVE MEYER asked: Since [HB 393] is only meant to
deal with illegitimate or fraudulent businesses, why couldn't
the threshold be $100? He then recalled testimony from the
state chamber that said it wanted the threshold at $500. He
said it sounds as though other states that have had [the
threshold] at $500 have been [lowering] that level. He asked,
"Do you remember what the testimony was from the state chamber
as to why they wanted it the higher level?"
CHAIR MURKOWSKI recalled that Ms. LaBolle had explained that
[the state chamber] didn't want to have a chilling effect on
smaller, legitimate businesses. Representative Murkowski said
she didn't want to speak for Ms. LaBolle, but it seems Ms.
LaBolle "was confused in the same way that I was, ... that the
Amways of the world would not be covered under ... exemption
(5), and so therefore you needed to have a higher threshold to
take care of them."
REPRESENTATIVE STEVENS reported that he has learned that at
least two of the states that have a higher limit are attempting
to return to a $200 figure. He said he's not sure the
Department of Law can give specifics on which two states those
are, but that there is a tendency to move to that lower limit.
Number 277
REPRESENTATIVE MEYER asked why the threshold shouldn't be at $50
or $100 because, [HB 393] is trying to prevent companies that
[Alaska doesn't want around] anyway.
REPRESENTATIVE STEVENS responded that it was just a compromise
figure because the [state] chamber and others voiced that they
wanted it higher. He stated, "I'm not certain there'd be any
objection to lowering, if you should so choose."
CHAIR MURKOWSKI offered that she was somewhat concerned about
the threshold amount being as low as it is, and said she doesn't
necessarily agree with Representative Meyer that it makes sense
to go much lower. She stated, "I think there is a de minimis
point where it just doesn't make sense anymore." On the other
hand, to people getting scammed - for instance, the single mom
who has a young baby and needs to stay at home and needs some
income - a couple hundred dollars is a lot of money to lose.
Number 299
REPRESENTATIVE CRAWFORD said he believes the exemptions are
sufficient, and that he is "real comfortable" with leaving [the
threshold] at $200.
REPRESENTATIVE ROKEBERG voiced concern relating to criminal
penalties, asking, "What is ... the crime for stealing $200 from
somebody?" He offered that the House Judiciary Standing
Committee [which he chairs] can look into that issue.
Number 317
REPRESENTATIVE HAYES moved to report HB 393 out of committee
with individual recommendations and the accompanying
indeterminate fiscal note. There being no objection, HB 393 was
moved from the House Labor and Commerce Standing Committee.
HB 377-WORKERS' COMPENSATION BOARD PANELS
Number 330
CHAIR MURKOWSKI announced that the next item on the agenda would
be HOUSE BILL NO. 377, "An Act relating to the establishment of
an additional southcentral panel to the Alaska Workers'
Compensation Board and to appointments to that panel; and
providing for an effective date."
Number 337
JOHN MANLY, Staff to Representative John Harris, Alaska State
Legislature, presented HB 377 on behalf of Representative
Harris, sponsor. He told the committee that [the Department of
Labor & Workforce Development (DLWD)] has workers' compensation
boards throughout the state that try to resolve issues that come
up in workers' compensation claims when they cannot be solved
administratively. There is a huge backlog in the Southcentral
area. House Bill 377 adds one board - a fourth board - to that
area that would allow the backlog to be worked on and claims
processed a lot quicker than they currently are. He mentioned
that HB 377 has a $5,000 fiscal note.
Number 346
CHAIR MURKOWSKI asked if the backlog in the Southcentral area is
much greater than in other areas of the state, and if this is
the reason HB 377 focuses on that area.
MR. MANLY said, "That's my impression, but Mr. Grossi could
probably answer that more specifically."
Number 353
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development, testified before
the committee. He said, "The answer is basically yes." The
Juneau board and the Fairbanks board are managing to keep within
a reasonable period of time getting the cases to the hearing.
The main portion of the backlog is coming from the Anchorage
area, and that's also where the increased caseload is occurring.
He speculated that it could be a result of population growth.
The Southcentral panel covers not only Anchorage, but also the
Kenai Peninsula, the Matanuska-Susitna area, Cordova, Valdez,
and Kodiak Island.
CHAIR MURKOWSKI referred to the Workers' Compensation Budget
Request Unit (BRU), and noted "an increment in the FY 02
budget." She reported that there was an additional hearing
officer hired last September. She asked, "So, you've got
additional hearings that are being scheduled, and so now you
need the board to ... review those hearings; is that how it's
proceeding?"
Number 373
MR. GROSSI explained that the panel of the Workers' Compensation
Board consists of the following members: the commissioner of
[the Department of Labor and Workforce Development] or his/her
designee - the hearing officer in most cases - and two lay
members: a labor member, who is usually a business manager from
a union; and an industry member, who is an executive of a
corporation or a business owner. These people sit together and
decide cases that can't be resolved any other way, and make a
final decision on workers' compensation cases.
MR. GROSSI said the number of hearing officers has been
increasing, but the lay members are busy people who are
executives of corporations or business managers of unions who
can volunteer [just] a certain amount of time. He said, "We've
gotten to that point where we actually need more hearing time,
and we need some more lay members to be able to hear those
increased hearings." This is a relatively inexpensive way to
handle it.
MR. GROSSI explained that the $5,000 fiscal note is a result of
the stipend the board members are paid. Lay members, who are
volunteers, are paid a $50-a-day stipend for the time they're
there, usually two to four days a month. He stated, "The $5,000
would come out of our ... workers' safety and compensation
account, which is our fees-driven payment system for the
agency." There wouldn't be any additional fees to the employers
or the insurance companies.
Number 401
REPRESENTATIVE ROKEBERG asked how long the $50 stipend has been
in effect.
MR. GROSSI answered, "Since statehood." He added that at the
time it was a significant amount, but today "it's kind of ... an
embarrassment." In response to a question from Representative
Rokeberg, he specified that there would be four Southcentral
panels, one panel in Fairbanks, one panel in Juneau, and an at-
large panel.
REPRESENTATIVE ROKEBERG asked if there are two [lay] members on
each panel.
MR. GROSSI replied in the affirmative.
REPRESENTATIVE ROKEBERG said that's 14 people. He asked what
the impact on the fiscal note would be if the stipend were
raised to $100.
Number 420
MR. GROSSI, noting that the board meets two to four times a
month, replied, "$14,000. I think that would be the approximate
number."
Number 436
CHAIR MURKOWSKI mentioned new regulations that require the
hearings to be scheduled in a more expedited manner, within the
60-day time period. She asked what impact this will have on the
respective workloads for the various panels.
MR. GROSSI responded that it will be a little problematic if
[the new panel] isn't approved. But if it does go through, "I
think we'll be fine."
CHAIR MURKOWSKI offered that [the Workers' Compensation Board]
will be fine because there will be an additional panel. She
asked if this will require more of the panel members by having a
requirement that hearings must be scheduled.
Number 444
MR. GROSSI explained that there isn't a problem in Juneau or
Fairbanks, and offered that an additional panel in Anchorage
will increase productivity by 25 percent. He stated, "We're
focusing on the area of the problem."
REPRESENTATIVE ROKEBERG asked if raising the stipend would help
productivity.
MR. GROSSI expressed that members sit on the board for volunteer
reasons, but he thinks it would be a nice gesture [to raise the
stipend].
REPRESENTATIVE ROKEBERG said he'd calculated that if there are
14 people meeting four days a month, that is 56 days; he'd
rounded that figure down to 50 days. He said with a $100
stipend, that's only $5,000. He asked about the source of the
workers' compensation account.
MR. GROSSI said, "It's a statutory designated-program-receipts
account. ... Basically, it's an account that's ... general
funds program receipts." He explained that it's paid out of a
portion of premium tax; for self-insurers, it's off of a
percentage of indemnity benefits or workers' compensation
benefits.
REPRESENTATIVE ROKEBERG commented that the $5,000 figure is
denoted for travel.
Number 468
MR. GROSSI replied that that's the way [the Division of Workers'
Compensation] accounts for the per diem, because there isn't
another line item to deal with it.
REPRESENTATIVE ROKEBERG asked if the fiscal gap would be
affected if the stipend was raised.
MR. GROSSI replied, "It would not affect the fiscal gap."
REPRESENTATIVE ROKEBERG asked if Mr. Grossi had any idea what
other boards around the state are being paid, either through a
per diem or a stipend.
Number 480
MR. GROSSI replied that some don't get any payments, but "some
of them get hundreds [of dollars]."
REPRESENTATIVE CRAWFORD asked, "I understand this would come
from program receipts, but would that take program receipts away
from some other program?"
MR. GROSSI explained that the only two programs that these funds
are available to are administration of workers' compensation and
workers' safety - OSHA [Occupational Safety and Health
Administration].
Number 489
REPRESENTATIVE CRAWFORD asked, "Would that take away from
enforcement of OSHA?"
MR. GROSSI offered that he thinks there are sufficient funds
available. Even if it's $15,000, it's not going to make a
significant difference.
CHAIR MURKOWSKI asked whether the $50 stipend is all the
compensation the board members receive, or if travel is
included.
MR. GROSSI replied that the board members are entitled to their
travel. He mentioned the at-large panel and said that panel's
travel costs are paid for.
CHAIR MURKOWSKI inquired as to whether the board members are
reimbursed for overnight expenses while traveling.
MR. GROSSI replied in the affirmative.
REPRESENTATIVE MEYER asked if food costs are covered also.
MR. GROSSI offered that he thinks the board members are entitled
to the $40-a-day food allowance that the state has.
REPRESENTATIVE MEYER asked if he was correct that the board
members receive a $50 stipend, travel costs, overnight expenses,
and $40 for food.
Number 506
MR. GROSSI explained that if the board member is from Anchorage
and is hearing a case in Anchorage, then he/she isn't entitled
to travel costs. He added, "They're entitled to travel [costs]
when they actually travel."
REPRESENTATIVE MEYER asked whether someone traveling from
Wasilla to Anchorage would get a mileage reimbursement.
MR. GROSSI responded in the affirmative.
REPRESENTATIVE MEYER asked about babysitting costs.
MR. GROSSI replied in the negative.
Number 510
REPRESENTATIVE ROKEBERG calculated the cost to be about $5,000 a
month, which would be an annual cost of $60,000. He asked,
"Would the $60,000 make an impact on the account?"
MR. GROSSI replied that it would be an increase, but that he
believes there would be sufficient funds in the account. He
said he couldn't answer with absolute certainty until he checked
the account.
REPRESENTATIVE ROKEBERG asked about any "fiscal baggage" [the
division] might be dealing with right now.
MR. MANLY replied, "We could certainly consider that at the
[House] Finance Committee."
REPRESENTATIVE ROKEBERG offered to make an amendment, or said
[the House Finance Committee] could take the issue up. He said
it might be easier if he offered an amendment, and then [the
House Finance Committee] could remove the amendment if it didn't
like the change.
Number 527
REPRESENTATIVE MEYER said although he doesn't disagree with
Representative Rokeberg's point, he doesn't think this is the
appropriate time or place to raise the stipend.
REPRESENTATIVE CRAWFORD stated that he doesn't disagree with
Representative Rokeberg, either, but his main concern is to get
extra board right now.
CHAIR MURKOWSKI mentioned testimony that this is essentially a
volunteer position, and if the stipend were raised, it wouldn't
be to compensate the board members for time spent; rather, it
would be a slight recognition of what they've done.
Number 538
REPRESENTATIVE MEYER expressed that at some point, he'd like to
look at all the boards and commissions, because it sounds as
though some have no stipend, some have a $50 stipend, and some
have a stipend over $100.
MR. GROSSI said he remembers seeing one [board or commission]
that had a $200 [stipend]. He stated, "I don't know exactly how
those are determined."
REPRESENTATIVE MEYER remarked, "I guess I'm a little sympathetic
to the fish board too. Perhaps they should get something."
Number 544
CHAIR MURKOWSKI offered that the Department of Labor [and
Workforce Development] could summarize its boards, and the
Division of Occupational Licensing could also, if [the
legislature] wanted that kind of a summary. She stated, "As
it's been pointed out, ... this is funded through a mechanism
where these folks pay in, and goes for the ... administration of
the workers' compensation program."
Number 548
REPRESENTATIVE MEYER moved to report HB 377 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 377 was moved from the
House Labor and Commerce Standing Committee.
HB 418-ELECTRONIC PROXY VOTING & NOTIFICATION
Number 555
CHAIR MURKOWSKI informed the committee that the next order of
business would be HOUSE BILL NO. 418, "An Act amending the
Alaska Corporations Code as it relates to delivery of annual
reports, notice of shareholders' meetings, proxy statements, and
other information to shareholders, and providing for electronic
proxy voting."
The committee took an brief at-ease from 4:10 p.m. to 4:11 p.m.
Number 562
AMY ERICKSON, Staff to Representative Lisa Murkowski, Alaska
State Legislature, introduced HB 418 on behalf of the House
Labor and Commerce Standing Committee, which was sponsoring the
bill by request. She explained that HB 418 very generally gives
Alaska corporations a more convenient, timely, and efficient
method of voting, by giving them the explicit ability to offer
electronic proxy voting to their shareholders. Approximately 25
states already offer electronic proxy voting and the process is
simple and quick. She explained that a shareholder receives a
PIN [personal identification number] electronically, which the
shareholder then uses to vote. The bill includes provisions
that permit corporations to send one copy of an annual report
and proxy materials to multiple shareholders at the same
address, and to stop sending annual reports and proxy statements
to shareholders whose mailing addresses are invalid.
MS. ERICKSON offered that this will result in cost savings and
added convenience for Alaska corporations. Reduction of paper,
printing, and postage costs will be substantial - especially for
larger corporations. She explained that proxy voting will allow
for faster tabulation and higher accuracy of voting results.
She said that because households in Alaska have the highest
computer ownership and Internet access of any state in the
nation, electronic voting will likely increase shareholder
participation.
Number 574
REPRESENTATIVE HAYES suggested that since electronic proxy
voting has worked so well for shareholders, maybe it should be
considered for elections in general in Alaska.
CHAIR MURKOWSKI responded that the title of [HB 418] is tight
enough that the committee wouldn't be including Representative
Hayes's suggestion in this particular legislation. She thanked
Ms. Erickson for presenting HB 418 to the committee.
Number 585
BUDD SIMPSON, Attorney, Simpson Tillinghast Sorensen &
Longenbaugh, testified on behalf of Sealaska Corporation. He
said HB 418 is not particularly directed at Native corporations,
but rather is an amendment to Title 10, "the regular
corporations code," and would apply to all Alaskan business
corporations. Addressing Representative Hayes's question
relating to the application of electronic voting to general
elections, he recalled that in 2000 the Republican Party of
Alaska had conducted a "straw poll" relating to making
electronic voting available to people who wanted it. He said,
"It was tried once before ... and I guess it worked out well,
with a lot of participation."
TAPE 02-25, SIDE B
Number 595
MR. SIMPSON emphasized that the language in HB 418 is not
something [Sealaska Corporation] made up itself. The language
has been modeled after various other states' existing statutes.
California and Delaware, in particular, are often ahead of other
states in corporate law areas. He said, "Everything that we've
suggested here has been approved by the federal Securities and
Exchange Commission [SEC]," so it already applies to most of the
larger, publicly traded business corporations in the country.
Number 583
MR. SIMPSON reported that 25 states have adopted similar
legislation relating to electronic voting and electronic
delivery of corporate materials. He explained that the
"householding" provision is the shorthand term for sending one
set of materials to the same address where several shareholders
live. Sealaska Corporation has found that in many cases, four
or five shareholders are at one address - for example, two
parents with two or three children - and "in real life, probably
one of those people is reading the materials anyway." He
explained that the parents are custodians for the minor
shareholders, and under current law [Sealaska] is sending a
five- or six-dollar set of brochures and proxy statements to
everybody at the address, which is pointless.
Number 574
MR. SIMPSON said Sealaska Corporation has done some scientific
surveying and found that over 60 percent of its shareholders
have either a computer or access to the Internet. These results
show that there is a big possibility that a lot of people would
actually use [electronic proxy voting]. Sealaska Corporation
also found that 29 percent to 30 percent of those polled
indicated an interest in both receiving corporate information
electronically and being able to vote through electronic media.
He said [Sealaska Corporation] thinks that not only will [HB
418] save money, but it will increase participation in voting.
Mr. Simpson noted that contrary to what some people think,
"corporations do like to get a big turnout for their elections
and get as much participation as possible."
Number 557
MR. SIMPSON said he'd had a chance to briefly review a fiscal
note and comments provided by the Division of Banking,
Securities & Corporations (DBSC). He said he disagreed with
nearly everything in the comments provided by DBSC. He noted
that there are basically two areas where [DBSC] anticipates
additional cost. The first is the supposed need to revise the
regulation pertaining to Native corporations. Mr. Simpson
offered that he doesn't view [HB 418] as particularly a Native
corporation bill. He said that after reading the regulations,
he didn't see any one place that needs to be revised if HB 418
is passed.
MR. SIMPSON offered that second, the fiscal note anticipates a
lot more adjudicative proceedings and shareholder complaints.
Mr. Simpson said he doesn't understand why this would be, and
suggested it is at least as likely there would be fewer
complaints filed and less problems [if HB 418 passes]. He also
suggested the division would actually have an easier time
dealing with these issues if it is dealing with things like
electronic proxies, rather than having to manually sift through
thousands of written paper proxies to check signatures.
Concluding that the DBSC is wrong about the fiscal note, Mr.
Simpson said he thinks the fiscal note should represent zero.
Number 533
MR. SIMPSON addressed another big concern of DBSC, that
electronic voting will benefit the corporations unfairly, to the
detriment of independent shareholders who are trying to run for
the board or trying to pass a resolution. He disagreed, saying
electronic voting will allow independent candidates to take
advantage of this process at least as much as the corporation
can. The ability to send materials to a large number of
shareholders electronically, without having to print something
or having to pay for postage, is a tremendous advantage to
whoever is doing it; corporations will save tens of thousands of
dollars a year. Mr. Simpson suggested that individual
shareholders are the ones that these kinds of costs really
"kill" in an election process. He concluded, "I think that this
will open up the process even more to independent candidates and
individual shareholders."
Number 510
CHAIR MURKOWSKI remarked that members of her family are
shareholders in several Alaskan corporations, and get too much
proxy information in the mail from the corporations. She
indicated the "householding" provision is a wonderful advantage,
not only for the corporation, but also for the shareholder.
Representative Murkowski asked: If her sons decided to get
independent and vote on their own, is there a process through
which they could notify the corporation that they want their own
statements to come to them individually?
MR. SIMPSON said that particular issue is addressed. He
explained how way this process would work: before a corporation
could use the householding provision, it would have to notify
the shareholders in writing and give them the opportunity to
either consent to that [or not], or advise them of the
opportunity. The shareholder could opt out easily at any time
by, for example, calling an 800 number or mailing a postcard to
the corporation. He said the corporation would be required to
make the changes within 30 days.
CHAIR MURKOWSKI asked Mr. Simpson how the SEC comes into play
with this type of legislation, because Native corporations in
Alaska are Alaska Native Claims Settlement Act (ANCSA)
corporations, which puts a different twist on things.
Number 480
MR. SIMPSON responded that he doesn't want to leave the
impression that the SEC has approved this exact bill [HB 418].
The SEC has adopted similar provisions on a national level, and
Sealaska Corporation hasn't been in touch with the SEC on this
particular legislation. He explained that the Native
corporations are exempt from regulation by the SEC with the
intent that the State of Alaska corporate code will control
Alaska Native corporations. The reason for that was so that the
corporations wouldn't be burdened by excessive regulation when
they were getting started up. While the SEC has approved of
this exact type of provision, it doesn't apply to Alaska Native
corporations. It would already apply to Alaskan corporations
that are publicly traded, which would make them subject to SEC
regulations; he added that he doesn't know if there even are any
of these corporations in Alaska.
Number 463
REPRESENTATIVE ROKEBERG asked Mr. Simpson if he could provide
the committee copies of the appropriate documents pertaining to
California and Delaware's statutes that "mirror" [HB 418].
MR. SIMPSON said he would do that.
REPRESENTATIVE ROKEBERG addressed the issue of how many times
"undeliverable mail" needs to be re-sent to shareholders. He
said currently [HB 418] requires that mail to be sent and
returned as undeliverable two times before ceasing to mail any
longer. He asked Mr. Simpson if two attempts is consistent with
what other states have enacted.
Number 447
MR. SIMPSON responded that currently, the corporations keep
sending mail to an address where a shareholder used to live and
has left no forwarding address. He noted that many times, the
U.S. Postal Service will forward mail; this wouldn't apply to
something that is actually forwarded to the shareholder. He
said the "two-times requirement" is from other state's statutes,
and is about right in terms of how often the mailings go out.
He mentioned that when dividend checks are returned as
undeliverable, that usually tells the corporation that nobody is
there.
Number 436
REPRESENTATIVE ROKEBERG asked if [Sealaska Corporation] would be
in compliance with state law if it continued sending out the
proxy statements and annual reports to an address where nobody
lives.
MR. SIMPSON said yes.
REPRESENTATIVE ROKEBERG asked Mr. Simpson what Sealaska
Corporation does with dividend checks that are returned as
undeliverable.
Number 426
MR. SIMPSON stated that Sealaska Corporation is required to send
the check to the shareholder's last known address. He said
Sealaska Corporation doesn't keep sending the "same ones over
and over again, but when new stuff comes out, we send it." He
said it's possible there are corporations out there that are not
doing this.
REPRESENTATIVE ROKEBERG asked Mr. Simpson if Sealaska
Corporation has around 17,000 shareholders.
MR. SIMPSON replied, "Almost [17,000], yes."
REPRESENTATIVE ROKEBERG said other than major "Fortune 500"
companies, 17,000 is a very large number of shareholders.
MR. SIMPSON said Sealaska Corporation is the largest in Alaska.
REPRESENTATIVE ROKEBERG asked Mr. Simpson if he has any idea
what the [national] average is.
MR. SIMPSON said no.
Number 407
CHAIR MURKOWSKI said she is "shocked and appalled" at the fiscal
note, which she'd been led to believe would represent zero, and
then "at 12:30 p.m., we find out that not only is it not a zero
fiscal note, but it's one of those 'oh, my gosh' fiscal notes."
She said she has been impressed by DBSC's attempt to get the
rest of Alaska online to do things like file a business license.
She asked why the fiscal note represents that it is "impossible"
for the corporations to come online like other businesses have.
Number 397
TERRY ELDER, Director, Division of Banking, Securities &
Corporations, Department of Community and Economic Development,
offered to meet with Mr. Simpson at some point and work through
some details pertaining to HB 418. He said Mr. Simpson had
indicated to DBSC what Mr. Simpson's interest was, but that
wasn't forwarded to him. He added that if there weren't ANCSA
corporations in Alaska, then he "wouldn't be here." He said
Alaska is the only state in the country that has responsibility
for "monitoring the director of proxy elections." He'd learned
through conversations with the corporate finance section of the
SEC that its experience dealing with proxy issues is totally
different from [Alaska's] experience. He said, "That's, in
fact, the reason why it is exempt from the SEC rules."
Number 368
MR. ELDER said the idea at the time was that the proxy
regulations should be closer to home and be done in Alaska,
rather than having people in Alaska always having to deal with
people in Washington, D.C. He said, "When we look at something
that otherwise would be fine and would appear to be innocuous in
corporation rules, we have to view them with the thought of what
impact does this have on the one program which is unique in
Alaska - ANCSA." He said [HB 418] doesn't deal specifically
with the corporation code but rather with proxy materials.
Number 354
MR. ELDER addressed the issue of the fiscal note and said when
"the program" was first started, the responsibility was first
given to Alaska. He continued by saying that later on when the
securities Act rules were changed to include enforcement, the
division at that time submitted a fiscal note that the
legislature "zeroed out." He said, "The fact is that it has had
- and does have - a fiscal impact."
Number 339
MR. ELDER said the DBSC has a number of concerns. He offered
that maybe some language could be worked out that would allay
the division's concerns. He noted that in a phone conversation
that day, he'd told Mr. Simpson that the division would want to
expand [the language] to make sure that other corporations and
shareholders had some input into this issue, which is, in fact,
their election.
MR. ELDER explained that "what makes [ANCSA corporations] so
different from anything the SEC does is the fact that ... the
shares aren't transferable." If a typical shareholder in a
"tradable" company were upset about something, it would be
fairly unusual for that person to wage a proxy war; more likely,
the person would sell his/her shares. However, because ANCSA
corporation shares aren't tradable or transferable, a
shareholder with a problem might attempt to have changes made
through proxy contests. Therefore, a lot of independent
candidates file and seek election, and some are successful.
Number 313
MR. ELDER informed the committee that [DBSC] gets a lot more
complaints expressed both from a corporation against
[individual] candidates and from those candidates against a
corporation. The division also receives a lot of complaints
about "mailing lists and other things which are covered in Title
10." He reported that it has always been the DBSC's position to
not enforce those complaints. He said there is a private right
of action in Title 10 whereby shareholders hire their own
attorneys and sue a corporation if they feel somehow that the
corporation has taken advantage of them or has violated Title
10. Mr. Elder remarked that the division's role is to bring to
the committee's attention another view that needs to be heard.
Number 280
REPRESENTATIVE HAYES asked why the figure for travel costs is
$26,000.
MR. ELDER said, "That is the total cost of both ... one
Investigator III, with $10,000 of travel, ... and with public
hearings to meet with shareholders around the state." He said
the division's regulations haven't changed much in the last 10
or 12 years, whereas the dynamics of corporations and their
elections have changed substantially. He said that when the
regulations are opened up for review, [the division is] going to
have first solicit comments from everybody - more than just
three newspapers in the state, because these corporations are
statewide. Therefore, the division's fiscal note includes a
higher level of running notices and actually obtaining input,
rather than relying on the mail. He explained that this is
expensive and that the division has never done it.
Number 256
CHAIR MURKOWSKI asked why the division would do it now.
MR. ELDER answered that it's time to update the regulations.
When the regulations were drafted 25 or 26 years ago - looking
at the record - it appears that most of the conversation was
between corporate executives and corporations. He explained
that since the ANCSA corporations had only been in existence for
5 to 7 years at that point, that was probably reasonable; a
sizeable percentage of minority shareholders weren't at that
table forming the regulations. He said these are their
elections for their corporations, and it's a mistake to ignore
them. Mr. Elder offered that it would be nice to make everybody
feel he/she had input in adopting regulations, as opposed to
feeling forever excluded from that process.
Number 215
MR. ELDER noted that the division has had a lot of complaints in
the past from individual shareholders about the shareholder
lists that they'd obtained from the corporation in order to
conduct their own proxy contest. Examples of complaints are
that the corporation wasn't responsive or timely enough, or that
people don't think the corporation gave them the latest list,
because they got a lot of returned mail. He said the
corporation has always responded by explaining that it gets a
lot of returned mail, also, and that it's hard to keep up a list
that doesn't have a high percentage of returned mail.
Number 189
CHAIR MURKOWSKI indicated she objected to the fiscal note. She
offered her opinion that [HB 418] is intended to update things
to allow for electronic voting. She told Mr. Elder that the
division is "socking what I think is a pretty legitimate bill
with a fiscal note to underwrite the full-course proxy
regulation review." She wanted to know if there is a way the
division could submit a fiscal note that applies only to the
cost of implementing HB 418. She said, "Here's an effort to
really bring about greater participation into the process, and
if this fiscal note goes to [the House Finance Committee], which
it would have to, even though it was not given a finance
referral, ... it's not going to go anywhere."
Number 153
MR. ELDER offered that as far as the regulations are concerned,
the division could submit a "scaled-down" version of regulations
that wouldn't include face-to-face meetings. For example, at
the committee's option, [the solicitation costs for the
regulation review] could be taken out and replaced with "the
bare bones." Then, when it comes time to adopt new regulations,
the division would do it without face-to-face meetings, if that
is how it is funded. He added, "What appears ... to be a
narrowly focused change is not going to be narrowly focused,
because people are going to be able to make comments on the
entire range of regulations."
Number 130
CHAIR MURKOWSKI asked, "By doing this, are we opening up the
whole shareholder dissident proxy fight ...?"
MR. ELDER warned that it is impossible to ignore issues like
mailing lists because these issues have been around for a couple
of decades.
REPRESENTATIVE ROKEBERG asked Mr. Elder if he is indicating that
the administrative procedures are such that the division could
not refuse to take comments on other provisions that aren't
covered by the instructions in the statute.
MR. ELDER replied that [DBSC] would take instructions from the
Department of Law.
REPRESENTATIVE ROKEBERG suggested [the committee] might want to
look at a legal opinion that would ask whether it could narrow
the focus of any regulatory revisions made just to conform to
the statute. He stated that he would be "very concerned" if
this were not possible. He said he appreciated Mr. Elder's
concerns, but that the division is trying to solve a long-term
problem, which is not what [HB 418] is trying to address.
Number 085
MR. ELDER said that is only part of the fiscal note. He
explained that the other part of the fiscal note is the
investigator.
REPRESENTATIVE ROKEBERG said what has him "baffled" is that [the
division] says that it doesn't enforce Title 10, and then has to
turn around and spend $100,000 to draft regulations on something
it doesn't enforce.
Number 079
MR. ELDER said, "[DBSC] enforces the proxy rules that are part
of the securities Act, and those rules go to the delivery of
..."
REPRESENTATIVE ROKEBERG interjected, "You said the private right
of action, which is in Title 10, ... so are you changing your
testimony now?"
Number 069
MR. ELDER responded that [the division] has regulations that
address the delivery of proxy materials, and [HB 418] would
affect those regulations. He explained that anyone can file a
complaint that goes to the receipt or the failure to send
information, but currently the division doesn't get these kinds
of complaints. The kinds of complaints [the division] gets most
often relate to misstated or fraudulent material. He offered
DBSC's opinion that this will open up the opportunity for more
kinds of complaints that will require an investigation.
CHAIR MURKOWSKI asked why the division thinks this will generate
more complaints.
Number 043
MR. ELDER offered that he doesn't think anyone has claimed that
a corporation has failed to make delivery of the required
information, the way things are now. However, when several
issues like delivery of information, mailing lists, and
householding are discussed together, Mr. Elder said he gets
nervous because he see the opportunity for complaints requiring
an investigation.
REPRESENTATIVE HALCRO said whenever one is given more
opportunities to participate in a process, the more
opportunities there are to complain about the fairness of the
process. He asked if this is similar to what Mr. Elder is
describing.
Number 002
MR. ELDER agreed it would certainly be part of the problem. He
said it is a good idea to broaden it, but it also changes the
methods of sending it.
TAPE 02-26, SIDE A
Number 001
MR. ELDER said if there is an increase in complaints, some of
which may or may not be well-founded, the division still will
have to investigate them, because it is the division's
responsibility.
Number 010
REPRESENTATIVE ROKEBERG asked, "Even though it's a private right
of action?"
MR. ELDER replied, "A private right of action goes to Title 10
itself. And in terms of the regulations that govern proxy
contests, that is [the division's] responsibility." He said if
something is covered in the proxy rules, then certainly a
shareholder can file a complaint with the division, resulting in
an investigation.
CHAIR MURKOWSKI said the conversation has hit on the two main
topics of discussion: revision of the regulations and an
increased number of complaints.
Number 040
REPRESENTATIVE HALCRO suggested that Mr. Elder might want to sit
down with the supporters of HB 418 and talk about some of the
"sticking points" he has with HB 418.
CHAIR MURKOWSKI said Representative Halcro's suggestion is a
sound recommendation because she believes some areas can be
ironed out. She encouraged Mr. Elder and Mr. Simpson to meet
and work out some details before the committee continues this
hearing on Monday, March 4, 2002.
Number 074
MR. ELDER noted that he had a phone conversation with Mr.
Simpson and offered to work on any details. He also said he'd
be willing to devote a fair amount of time between today and
Monday, March 4, to meet with Mr. Simpson.
CHAIR MURKOWSKI said she understands that Mr. Elder has some
additional issues with HB 418 that have been documented, and
encouraged him to include those issues in his discussion with
Mr. Simpson.
Number 101
CHAIR MURKOWSKI announced that the House Labor and Commerce
Standing Committee would hold over HB 418 until Monday, March 4,
2002.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:05 p.m.
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