ROBERT C. HINKLEY
BEFORE THE STATE OF MINNESOTA
SENATE JUDICIAL COMMITTEE
FEBRUARY 19, 2004
My name is Robert C. Hinkley. I have been a corporate
attorney for more than 25 years. Before I retired from active
practice three years ago, I was a partner in the firm of Skadden,
Arps, Slate, Meagher & Flom LLP, one of America's leading law
firms. While at Skadden, Arps, I became aware that there was
something fundamentally wrong with the corporate law which
caused corporations to violate the public interest in their pursuit
of profit. I retired from the active practice of law because I
wanted to devote more of my time to solving this problem.
I am the originator of something called the Model Code for
Corporate Citizenship, a relatively simple amendment to the
corporate law which will change the design of corporations to
make them respect the public interest. Senate Bill 1529 is de-
rived from this Model Code. I appreciate the opportunity to have
my testimony presented to this committee with respect to that
America'a corporations are dedicated by law soley to the
pursuit of their own interests. In Minnesota, this dedication can
be found in Section 251 of the Business Corporation Act. This
dedication encourages corporations to pursue their own interests
to the fullest extent permitted by law. It inhibits companies
from being socially responsible. It encourages them to harm
the environment and other elements of the public interest. It
encourages them to be bad citizens. It is a flaw in the
Section 251 imposes a duty on corporate directors to act
only in the best interests of the company. Directors who violate
this provision run the risk of being sued by their corporation's
sharheholders. Senate Bill 1529 will remove this risk by bal-
ancing the duty to shareholders with obligations not to harm the
environment, human rights, the public health and safety, the
welfare of our communities and the dignity of employees. It will
give Minnesota corporations permission to be good citizens.
I would like to put this legislation in an historical context.
We Americans have always had a love/hate relationship with our
corporations. We love what we percieve they do for our econo-
my. We hate it when their excesses abuse the public interest.
There is nothing, however, that says a strong economy and pro-
tection of the public interest have to be thought of as forever
mutually exclusive. They are not.
Indeed there have been times when we have had both.
For nearly 100 years after the American Revolution, our country
experienced little, if any, corporate abuse of the public interest.
Initially, this was because, having rid themselves of the influ-
ence of King George's corporations, our ancestors' state legisla-
tures severely limited the number of companies they allowed to
be formed. Later, as the number of companies grew, legisla-
tures imposed through the corporate law, strong controls on
corporations which required them to respect the public interest.
Unfortunately, these controls were eliminated in the late
19th and early 20th centuries. When this occurred, it changed
the design of the corporation and provided the source of many of
the problems we face today.
Corporations owe their existence as much to the public
whose laws allow them to be formed and operate, as they do to
shareholders who provide the capital. It is entirely appropriate
that they should have obligations to both. It is entirely inappro-
priate that our laws continue to encourage them to pursue
shareholders' interests by polluting and destroying other ele-
ments of the public interest.
A corporation designed to pursue its own interest at the
expense of the public interest is flawed. We can correct that
flaw, preserve the profit motive and require companies not to
harm the public interest. Senate Bill 1529 provides the means
through which this can be achieved.