April 2, 2009
Professor Judd Sneirson Testifies to Oregon Legislature on House Bill 2829
Assistant Professor Judd Sneirson testified before the Oregon Legislature last week, urging the passage of House Bill 2829, which seeks to amend Oregon’s “other constituency” statute, codified at section 60.357(5) of the Oregon Revised Statutes. Sneirson hopes the amendment will help businesses looking into adopting sustainable practices.
As it stands, the other-constituency statue authorizes boards of directors of Oregon corporations to consider the interests of non-shareholder constituencies, such as employees, customers, suppliers, and communities, when evaluating the merits of a proposal to acquire the company.
According to Professor Sneirson’s testimony, many states enacted similar statutes during the 1980s in response to the surge of corporate takeover activity. Oregon’s other-constituency statute was enacted in 1989 when a New York corporation sought to take control over Portland’s Precision Castparts Corporation.
Professor Sneirson says the idea behind the bill, which he helped draft, is two-fold. First is to eliminate the takeover-only limitation in Oregon’s other-constituency statute, thereby reaffirming the business-judgment rule in Oregon. This would allow Oregon corporations a bit more comfort if they choose to incorporate sustainable business practices that might sacrifice shareholder profits. The second purpose of the bill is to explicitly mention the triple-bottom-line in allowable decision-making considerations. The bill is part of a larger effort by Oregon Lawyers for a Sustainable Future, whose corporate governance work group Sneirson is a member, to make Oregon’s corporate code more amenable to green or sustainable businesses.
Professor Sneirson told the Oregon Legislature that he views the amendment to Oregon’s other-constituency statue important for three reasons:
“First, Oregon law on the business judgment rule is sparse and uneven; House Bill 2829 would clarify Oregon law on this point and provide added comfort to directors of Oregon corporations when making disinterested, informed, good-faith decisions. Second, a generally applicable other-constituency statute would help dispel the common misconception that corporate boards have a legal obligation to maximize shareholder profits and may not take into account other corporate constituencies’’ interests. And third, the Bill might encourage directors of Oregon corporations (and their attorneys) to view the interests of their corporations more broadly.”