Legislature(2015 - 2016)HOUSE FINANCE 519
04/03/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB100 | |
| HB41 | |
| HB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 80 | TELECONFERENCED | |
| + | HB 15 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 155 | TELECONFERENCED | |
| *+ | HB 100 | TELECONFERENCED | |
| += | HB 41 | TELECONFERENCED | |
| += | HB 49 | TELECONFERENCED | |
HOUSE BILL NO. 49
"An Act relating to corporations, including benefit
corporations, and other entities; and providing for an
effective date."
2:57:41 PM
REPRESENTATIVE PAUL SEATON, SPONSOR, explained the bill. He
stated that HB 49 expands the options for Alaskan
entrepreneurs and investors by placing a new type of
corporate entity, the benefit corporation, in Alaskan
statute. A benefit corporation is a for-profit corporation
which incorporates public benefits and community
improvement into its business practices, no matter the
principal service or product provided. Allowing the
creation of benefit corporations will give business owners
more choice in how to run their business and will bring to
Alaska a slice of the $6.6 trillion that is invested
nationally in similar corporations. Corporate law generally
requires a corporation to consider the financial impact to
their shareholders as the top priority when making
decisions. Under the benefit corporate structure, owners
and boards have the freedom to take actions which
positively impact their communities without fear of
violating a fiduciary duty. Benefit corporations are formed
voluntarily and have the same tax status of any other for-
profit corporation. By electing in their articles of
incorporation to become a benefit corporation, a business
simply gains the flexibility to include mission and social
impact in their business practices. Twenty-seven other
states have passed benefit corporation legislation and many
more have benefit bills in process. Over 1400 benefit
corporations have incorporated in those states, including
Ben & Jerry's, Patagonia, Rasmussen College, Epic Coffee,
and King Arthur Flour Company (America's oldest flour
company). Each of these companies works to benefit the
public and their communities in the way that matters most
to them. HB 49 also includes measures to ensure
accountability and transparency. Just as a traditional
corporation provides their shareholders with financial
reports, a benefit corporation will additionally create and
publish a biennial benefit report describing how the
company has pursued the general public benefit. This
report, which is held against a third party standard,
allows shareholders, investors, and the public to
confidently invest in benefit corporations that share their
values.
3:00:36 PM
Representative Wilson wondered why the legislation was
needed. Co-Chair Thompson provided his understanding of the
current system related to corporations. He stated that the
shareholders currently had a sizeable profit in the
corporation, but the corporation gave 80 percent of its
earning to charity. The bill would protect the corporation
from being sued by a shareholder.
Representative Seaton agreed, but felt it was an extreme
example. The legislation was intended to benefit the
community.
Co-Chair Neuman asked if corporations could currently give
a percentage of their profits to other entities, even
though there was a risk of being sued by the shareholders.
Representative Seaton replied in the affirmative.
Co-Chair Neuman pointed out how this legislation could be a
"two-edged sword." He felt that there could be a conflict
of interest. He furthered that the bill made the
corporation identify who receives the benefit, and how much
was given. Representative Seaton replied in the
affirmative. He stated that the corporation must file a
benefit report.
Co-Chair Neuman asked if they had to pay any taxes, before
the benefits were paid. Representative Seaton replied that
it was like a C corporation.
3:06:28 PM
Representative Pruitt queried the rights of the
shareholders. Representative Seaton looked at page 14, and
noted the stockholders dissent language.
TANEEKA HANSEN, STAFF, REPRESENTATIVE PAUL SEATON,
responded that the shareholders had the ability to dissent,
at the time a corporation may decide to become a benefit
corporation. Establishing a benefit corporation requires a
two-thirds vote of the board of directors to become
established. She looked at a section that allowed the
shareholders the right to bring action, as related to the
specific benefit purpose. If that shareholder felt that the
benefit corporation was not perusing its public benefit
purpose, they could bring corrective action.
3:09:16 PM
Representative Pruitt surmised that the shareholder could
sue, if they felt that the corporation had not provided
enough benefit. Mr. Hansen replied that the shareholder
could bring action, but not for monetary damages. They
could only bring corrective action.
3:10:26 PM
ERIC TROJIAN, DIRECTOR OF POLICY, B-LABS, explained that B-
Labs worked to bring investors and social entrepreneurs. He
stated that there was an impediment in corporate law that
inhibited the stakeholders from receiving the full revenue.
He stressed that the purpose of the legislation would
protect the legislature, by allowing the shareholder to
sue, if the company was not considering the social mission.
He stated that Idaho had recently enacted an almost
identical bill. He shared that there were currently 2200
benefit corporations nationwide, and there were several
million dollar deals within those companies. He felt that
the bill was a deregulation of a purpose of a corporation
from a sole requirement to maximize profits to deregulating
by allowing the market direct the company's action. The
shareholder will then understand the direction of the
company, via the specific style of the corporation as
outlined in the corporation certificate. He stressed that
there were some benefit corporations that were thriving.
3:17:22 PM
Co-Chair Thompson asked if the federal government treated a
B corporation any differently than the C corporations. Mr.
Trojian responded in the negative, because the bill did not
address any tax issues.
Representative Wilson wondered what would occur if only 60
percent of the shareholders wanted to contribute to a local
nonprofit. She asked if the other 40 percent had a right to
sue. Mr. Trojian responded that the board of directors made
those decisions. The shareholders had a right to vote out
the board of directors. He explained that the benefit
corporations did not give large amounts of money to
nonprofits. The benefit corporations wanted to instill a
certain moral or mission within the company. He used the
example of Patagonia and King Arthur Flour using organic
materials. He stated that the benefit corporations made
decisions with the community and shareholders in mind.
Representative Wilson wondered if the same concept could
occur within the shareholders, versus creating an entirely
new corporation. Mr. Trojian indicated no. He reported that
no because the purpose of that corporation was to maximize
profits.
Representative Pruitt queried the goal of B-Labs. Mr.
Trojian responded that his entity's mission was to use the
power of business to solve social and environmental
problems. His organization felt that there were too many
problems in the world for only government to solve.
Representative Pruitt asked for examples of companies where
shareholders may have sued, because they did not believe
that the company went far enough to contribute to society.
Mr. Trojian responded that there was not any case law at
present related to the legislation.
3:24:13 PM
Representative Gara stressed that the law did not require a
specific social cause. Mr. Trojian responded in the
affirmative.
Representative Gattis surmised that the bill allowed for a
greater participation by the consumer to contribute to a
greater cause. Representative Seaton agreed, but stressed
that the corporations would pay taxes and benefit the
community.
Co-Chair Thompson CLOSED public testimony.
Co-Chair Neuman MOVED to report CSHB 49(L&C) out of
Committee with individual recommendations and the
accompanying fiscal note.
Representative Pruitt OBJECTED. He felt as if the state
would be opening up the doors to a problem to greater
environmental attacks on Alaska. He focused his concerns on
environmental taxes.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki, Munoz, Neuman,
Thompson
OPPOSED: Gattis, Pruitt, Wilson
The MOTION PASSED (6/3).
CSHB 49(L&C) was REPORTED out of committee with a "do pass"
recommendation and with a new fiscal impact note from the
Department of Commerce, Community and Economic Development.
Co-Chair Thompson discussed the agenda for the following
meeting.