Model Laws >>  Corporate Decency Act


The Corporate Decency Act

I. TITLE The Corporate Decency Act

II. SHORT TITLE A bill to amend Section 000 of the State Code to establish new requirements for corporate entities and corporate officials and to impose new penalties on corporate entities and officials that violate existing state law and the provisions of this Act.

III. PURPOSE To establish a system of corporate governance that better protects employees and the public at large from corporate lawbreakers and that leads to greater compliance with existing civil and criminal law.

IV. ENACTING CLAUSE Be it enacted by the State that Section 000 of the State Code is amended by adding at the end the following new section. The Act may be cited as the Corporate Decency Act.

V. FINDINGS The legislature finds that -

A. Current state corporation provisions, and traditional criminal law sanction of fines and imprisonment, do not adequately deter lawbreaking by companies or their executive officials. In fact, penalties against corporate officials are far less severe than those against ordinary lawbreakers; fines are nominal, prison sentences are frequently suspended, and probation is easily granted;

B. Industrial plants that abruptly close down or relocate can disrupt a local economy's employment structure and tax base;

C. Many company employees can now legally be dismissed for the exercise of their political rights of speech and assembly;

D. The limited disclosure of information regarding corporate entities' economic and social impacts deny various people, groups and communities vital information about practices that greatly affect them; and

E. The cost to society of corporate lawbreaking, to the extent that in can be quantified, evidences the need for a more comprehensive legal framework to increase compliance with the law by corporations. Corporate crime costs run into billions of dollars. These costs involve not only large financial losses but also injuries and health hazards to workers and consumers. Over 75 percent of all corporate crimes are in the environmental and labor protection areas.

VI. JURISDICTION Any state court or administrative tribunal of appropriate jurisdiction shall have the authority to offer declaratory or equitable relief for any violation of this Act. Individuals may commence an action in a state court of appropriate jurisdiction or before an administrative tribunal in the event that the state official charged with enforcing any provision of the Act fails to do so whether the individual is or is not specifically aggrieved by a violation of the Act.

VII. STANDING Any person has standing to bring a claim in a state court of appropriate jurisdiction or before an administrative tribunal challenging any act or conduct of a person that threatens to cause or is causing substantial harm to the public.

VIII. ATTORNEYS FEES The court may grant such relief as it deems appropriate and shall award reasonable costs of litigation, including attorney's fees and other reasonable costs of litigation if a party substantially prevails in a court of final jurisdiction, or the court determines that such action served an important public purpose, or either party can demonstrate that its economic interest is small in comparison to its costs of effective participation or that it lacks sufficient resources to participate in the action absent the award.

IX. EFFECTIVE DATE This Act shall become effective the first calendar year commencing six months after its enactment.

X. DEFINITIONS

A. "Person" means any individual, governmental entity (including any state or political subdivision or department or public agency thereof), or corporate entity as defined herein.

B. "Corporate entity" means any corporation, individual unincorporated association, partnership, authority, or local government organized or doing business in the state.

C. "Serious danger" used with respect to a product or business practice, means that the normal or reasonably foreseeable use of, or the exposure of human beings to, such product, practice or service will cause death or serious bodily injury to an individual.

D. "Serious bodily injury" means any impairment of physical or mental condition, including physical pain, a substantial risk of death or serious permanent disfigurement, unconsciousness, extreme pain, or permanent or protracted loss or impairment of the function of any bodily member or organ.

E. "Warn or notify" used with respect to employees, the public, or the community, means to give sufficient description of the danger to all individuals working for or in the corporate entity, those who are likely to use a product or service, and those who are or who are likely to be in the proximity of the serious danger.

F. "Appropriate state agency" means a state agency having regulatory authority or enforcement powers with respect to the product, service or practice and dangers of the sort discovered.

G. "Corporate official" means an appropriate manager having management authority or enforcement powers with respect to the product, service or practice, a corporate officer, a member of the board of directors, or an agent of the corporate entity.

H. "Discover" means obtains or has information that would alert a reasonable person in the circumstances in which the discoverer is situated that it is probable that a serious danger exists.

I. "Class One Offense" means any offense or violation by a corporate official or those responsible to a corporate official that is knowingly committed or that the corporate official on the balance of probabilities should have known would be committed that results in the death of a pon that is recklessly or negligently committed by a corporate official or those responsible to a corporate official, or is knowingly committed or that the corporate official on the balance of probabilities should have known would be committed but that does not result in the death of a person or serious bodily injury.

XI. ADMINISTRATIVE AUTHORIZATION The Secretary of State and all agencies charged with duties under this Act are authorized to make and amend such rules and regulations as may be necessary to carry out the provisions of this Act.

XII. CONFLICTS The rights and remedies provided for in this Act shall be in addition to and not in lieu of any other rights and remedies provided by common law or under state law.

XIII. PREEMPTION This Act shall preempt local law to any extent local law is inconsistent, unless the relevant sections of local law are at least as protective of public health and welfare as the provisions of this Act and in all cases, provisions of this Act must be liberally construed to benefit the party bringing an action under the Act.

XIV. SEVERABILITY If any provision or application of this Act to any person or circumstance is held invalid does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of the Act are severable.

XV. PROHIBITED ACTIVITY

A. CONCEALMENT It shall be unlawful for any corporate entity or corporate official to conceal from authorities any product or process that [results] in death or serious injury. This offense shall be considered a Class One Offense under the Act.

B. HOMICIDE It shall be unlawful for any corporate entity or corporate official to engage in conduct which results in death, which such corporate entity or corporate official knew or should have known would result in death, or which was reckless or negligent. This offense shall be consid for any corporate entity or corporate official, to knowingly or negligently endanger the public. This offense shall be considered a Class Two Offense under the Act.

D. FALSIFICATION AND DESTRUCTION OF DOCUMENTS It shall be unlawful for any corporate official to destroy or falsify documents or to negligently allow the destruction of documents pertaining to hazards to the public, or the corporate entity's employees or agents. This offense shall be considered a Class Two Offense under the Act.

E. WHISTLEBLOWER PROTECTION AND MALICIOUS DISCHARGE It shall be unlawful for any corporate official to discriminate against, retaliate against, or deprive an employee of employment, employment benefits, employment opportunities, or any other rights secured under the laws of the state because of the employee's involvement in or participation in any of the following activities:

1. Filing, instituting, or causing to be filed or instituted any investigation or proceeding resulting from the administration or enforcement of any federal, state, or local statute, regulation or executive order;

2. Assisting or participating, or being about to [preparing to] assist or participate in any manner in any proceeding or action to carry out the purposes of this Act;

3. Communicating to, or providing any information to any employer, or employer's agent, regarding a violation, or suspected violation, of any federal, state, or local statute, regulation or executive order;

4. Participating in any federal, state or local government investigation or other proceeding; and/or

5. Opposing any practice made unlawful by any federal, state, or local statute, [law,] regulation or executive order

Upon suit being brought for violations under this provision, the defendant employer must clearly and convincingly prove the action was not with malice or in bad faith. This offense shall be considered a Class Two Offense under the Act.

XVI. RESPONSIBILITIES

A. CHARTER REQUIREMENT FOR ALL CORPORATE ENTITIES DOING BUSINESS OR LICENSED IN THE STATE Any corporate entity organized or doing business in the state shall have good corporate character. A corporate entity that through its action or inactions evidences an absence of ethics or virtue, or tendency to habitually engage in activities which are detrimental to the public health, safety, or welfare including, but not limited to,: patterns of misconduct, disregard for the law or government regulations designed to protect the public, failure to prevent deceptive practices, the abdication of responsibility, disregard for government reporting requirements, involvement in lawbreaking in any area of activity, lack of candor and forthrightness with governmental agencies, criminal activity, or patterns of regulatory violations shall result in the corporate entity being in violations of this provision.

Any conduct shall be probative of character which illuminates the likelihood of prospective conduct and probable performance, including whether the misconduct is an isolated incident or reflects a pattern of misbehavior, and how recently the misconduct occurred.

The Secretary of State shall require submission of proof of character as a condition of allowing the corporate entity to do business in the state. The Secretary may at any time require supplemental written character reports in order to enable the Secretary to determine whether the corporate entity continues to meet the state's character requirements. A violation of this provision shall be considered a Class Two Offense under the Act.

B. REPORTING AND DISCLOSURE RESPONSIBILITIES

1. OMNIBUS WORKER, COMMUNITY, CONSUMER RIGHT TO KNOW All corporate entities shall provide workers, consumers and the public with information on the hazardous substances in the workplace, community and environment, and establish emergency planning and notification plans which would alert the public in the event of a release of hazardous substances.

Information to be provided includes:

A violation of this provision shall be considered a Class One Offense under the Act.

2. VICTIM NOTIFICATION Corporate entities shall notify those who may [forseeably] be adversely affected by potential health or safety dangers associated with any product, practice or service of the corporate entity. A violation of this provision shall be considered a Class One Offense under the Act.

3. EXECUTIVE RESPONSIBILITY Corporate officials must notify employees, agents and sub-contractors and appropriate government agencies if a serious danger exists in handling or using a particular product or service, within 30 days of discovering the danger. A violation of this provision shall be considered a Class One Offense under the Act.

4. PLANT CLOSING If a corporate entity intends to close or transfer any of its operations, resulting in a loss of employment of 500 or more persons or 20% of the total labor force within a geographically continuous area, or 20% or more of the labor force of a standard metropolitan statistical area, whichever is smaller, it shall furnish the Secretary of State, the Secretary of Labor, affected employees and community representatives written notice of the timing and extent of such a closing or transfer not less than 24 months in advance. It shall publish in a local medium any plan to relocate or rehire affected employees, except where the Secretary of State finds that the corporate entity could not reasonably have predicted its intention to close or transfer, in which case the Secretary of State may allow such shorter notice as may be reasonable under the circumstances.

The Secretary of State has the authority to appoint an arbitrator with subpoena power to hold hearings in the affected community in order to make findings of fact concerning (a) the economic reasons for the closing or transfer, (b) any non-economic reasons, (c) and the potential economic, social and environmental cost of the abandonment to the affected community. These hearings will produce a community impact analysis to be forwarded to the Secretary of State, and included in a yearly report from the Secretary of State to the state legislature summarizing the causes and effects of plant closings and relocations.

The corporate entity will be liable for the loss of revenue to the city, county or state government in a percentage equal to one year's tax revenues lost as a result of such transfer or closing; severance pay for workers; and community assistance for areas they are leaving. In addition, the corporate entity receiving the benefits must provide retraining for its workforce in the event of plant closings. Corporate entities must also offer the local community the right of first refusal on the facility being abandoned, and pay the State the value of any tax credits and or tax abatements received by the corporate entity that have not expired.

(b) Closure report

Upon the permanent cessation of production operations at a Department of Energy defense nuclear facility, the Secretary of Energy shall submit to Congress a report

(1) a complete survey of environmental problems at the facility;

(2)budget quality data indicating the cost of environmental restoration and other remediation and clearup efforts at the facility; and

(3) a discussion of the proposed cleanup schedule.

5. STATE REPORTING REQUIREMENTS

a. ANNUAL REPORTS Every corporate entity incorporated or doing business in the state, whether foreign or domestic, must provide the Secretary of State by December 31 of each year:

1. The names, addresses, and number of shares held by the twenty largest shareholders and an list of, in descending order, the twenty largest beneficial holders of voting shares in the corporate entity excluding any holder with less than one-tenth of one percent of the outstanding shares. For each stockholder, the annual report shall list the name, address and type (bank, broker, holding company, individual or trust), the number of voting shares held (as of the end of the calendar year), and the number of shares over which the holder has sole voting power, shared voting power, or no voting power under any circumstances. In determining the number of shares held, all nominee and other accounts of each shareholder, including the accounts held be depository trust company, shall be aggregated and reported as one account in the name of the bank, broker, holding company, individual, or other identified shareholder. For each revolving credit agreement, the corporate entity shall report the total amount available, the commitment fee and the average monthly amount outstanding during the previous year.

Performance by geographic center, reporting its assets at year end, gross revenue, total expense, income tax, net income, number of US employees, and number of non-US employees for the following geographic regions: North America (excluding US), Asia-Australasia, Europe, Middle East, Latin America/Caribbean, Africa, total international, total domestic and total worldwide. The firm shall also report the same figures by country for the four countries (excluding the US) in which the firm and its subsidiaries have the largest sales and assets.

2. All political action committee contributions and the amount of money given to each individual candidate;

3. Information on employment patterns, environmental matters, job safety and health, foreign production, shareholder ownership, the time and place of all shareholder meetings and yearly local, state, and federal tax payments, including: For each of the five largest of its facilities which report to the Environmental Protection Agency and to state health authorities on air and water pollution, the firm shall indicate in its annual export its actual average daily emissions and effluents for each pollutant required to be reported under the federal Clean Air Act and Clean Water Act. In addition, the corporate entity shall list in its annual report any outstanding environmental legal actions at each of these facilities.

Each corporate entity shall indicate in its annual report the total of all occupational injuries and illnesses incurred. This total will be based on data recorded on the plant-wide Occupational Safety and Health Administration Form 200 or its equivalent, and aggregated for all plants owned and operated by the corporate entity. If a corporate entity manufactures a chemical product that is identified only as a trade named substance, disclosure of the chemical constituents of the substance shall be provided upon request of any stockholder of record or employee of the corporate entity.

4. All criminal convictions, and all pleas of nolo contendere;

5. All civil infractions and verdicts against the corporate entity and all of the violations of local, state and federal statutes, regulations, or executive orders; and

6. The status of its compliance with all federal, state and local health and safety laws, including occupational safety and health laws, environmental protection laws and equal opportunity laws. The distribution of the workforce by sex, race and job classification in the same format as that required to be reported to the Equal Employment Opportunity Commission in the EEO-1 Consolidated Report or its equivalent. In addition, the category, of officers, shall be added to the present nine job classifications, and the net increase or decrease over the previous year in the number of employees at year end in each category shall be indicated.

A violation of this provision shall be considered a Class Two Offense under the Act.

b. HEALTH AND SAFETY INFORMATION IN CASES THAT ARE SETTLED OR ADJUDICATED Any corporate entity that settles a case involving health or safety information, shall make available to the Secretary of State any material contained in sealed records that could be useful in preventing the endangerment of the public at large. A violation of this provision shall be considered a Class Two Offense under the Act.

c. INSURANCE DISCLOSURE Any property/casualty insurance company incorporated or doing business in the state shall identify and make available to the public, relative to each claim and/or disputed injury the following:

(1) The physical hazard or unsafe condition that resulted in the claim;

(2) The make and model of the product, or service, that served as host for the hazard by category to assure for its easy and accurate identification;

(3) The hazardous material, substance or service by both brand and generic name any offending chemical content that could cause harm.

This information an annual summaries of all death or injury-related occurrences shall be transmitted to the State Insurance Commissioner and to the Secretary of State on or before the last day of each year. A violation of this provision shall be considered a Class Two Offense under the Act.

 

C. SHAREHOLDER RIGHTS

1. NOTIFICATION A violation of any of the following provision shall be considered a Class Two Offense under the Act.

(a) Corporate entities must individually notify, by mail, all shareholders of all criminal convictions, nolo contendere pleas, and civil sanctions incurred by the corporate entity whenever proxy materials are distributed, or in the event that no proxy materials are distributed , by mail to all shareholders at least once a year.

(b) Upon request by a shareholder of record, the corporate entity shall provide a description of each long term debt (debt due after one year) and revolving credit agreement of the corporate entity in excess of one million dollars. The corporate entity shall include the name of the creditor, the character of the debt, the nature of the security if any, the date of origin, the date of maturity, the total amount of the debt, the rate of interest, and a copy of any and all restrictive covenants attached to the indebtedness.

(c) Upon request by any shareholder of record, or member of the public, the corporate entity shall provide copies of its discharge monitoring reports, as filed monthly with the EPA, and its emissions inventories, as filed semi-annually with the state and local agencies, for any and all of the firm's facilities.

(d) Upon request by an shareholder of record, or member of the public, the corporate entity shall provide EEO-1 reports for any or all of its establishments.

2. CONSTITUENCY BOARD Every corporate entity subject to this Act shall have at least nine board members, in addition to their traditional fiduciary obligations, with responsibilities to oversee, investigate, receive complaints about and address the board on matters affecting, respectively, 1) employee well-being 2) consumer protection, 3) environmental protection, 4) community relations, 5) shareholder rights, 6) law compliance, 7) technology assessment, 8) anti-trust standards, and 9) political relations.

3. BOARD COMMITTEES Every corporate entity subject to this Act shall have an Audit Committee, Nominating Committee, a Compensation Committee, a Public Policy Committee and a Law Compliance Committee, all of which shall be comprised of independent directors, except for the Public Policy and Law Compliance Committees, which shall have a majority of independent directors.

4. SHAREHOLDER NOMINATIONS AND VOTES Shareholders of every corporate entity subject to this Act shall have the right to nominate candidates for the board of directors if such candidates are supported by a reasonable absolute minimum number or percentage of shares, to be determined by the Securities and Exchange Commission. Only the actual or beneficial owners of stock are eligible to nominate a candidate or to vote for candidates. The corporate entity would provide equal funds to all nominees - the maximum amount to be determined by the Secretary of State. At least six weeks prior to a shareholders' meeting to elect directors, each shareholder shall receive a ballot and brief written statement by each candidate as to their qualifications for the position.

5. SHAREHOLDER REVIEW Shareholders of any corporate entity subject to this Act shall be entitled to vote on any transaction involving the purchase, sale, lease, merger, consolidation, financing, refinancing, dissolution or liquidation of assets equal to ten percent of the corporate entity's total assets, or the sale or redemption of ten percent of the company's outstanding stock, or the authorization of corporate stock or securities in any amount. At least six weeks before a shareholder vote on such a matter, the board shall forward a written statement to all shareholders indicating the vote of directors on the issue, reasons form the majority for their approval, reasons from the minority for their disapproval, and the foreseeable benefits and risks of implementing the proposal.

6. CUMULATIVE VOTING Every shareholder of any corporate entity subject to this Act entitled to vote at any directorial election may cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of votes to which the shareholder's shares are entitled. Classification, or the staggered election of directors which have the effect of undermining the cumulative voting's purposes of minority representation, are prohibited.

D. TRUTH IN BIDDING Any corporate entity receiving tax abatements, tax credits or subsidies must enter into a legally binding contract with any governmental entity providing these benefits, stating the precise benefits the corporate entity will provide in exchange for the benefits conferred by the state. In those cases where the corporate entity is providing jobs - the number of jobs, the job level, the salary by level, and the duration of the jobs must be made public.

E. RECALL OF DIRECTORS In the event that a corporate entity engages in criminal activity and is convicted or pleads nolo contendere, any shareholder shall be entitled to a full list of the shareholders of all classes of stock. The list shall be furnished to any shareholder seeking to notify other shareholders that a recall of the current officers and directors is in order. The cost of furnishing the list and mailing such notices shall be borne by the corporate entity.

F. INDEPENDENT DIRECTORS AND SHAREHOLDERS The majority of the board of directors of each corporation doing business or incorporated in the state must be independent. An independent director is one who is not, and was not within the past five years, an officer or an employee of the firm or any of its parents, subsidiaries or affiliates; is not a relative of an executive officer of the firm by marriage, blood , or adoption ( unless more remote than first cousin); does not have any equity interest in the firm; is not a lawyer who currently or in the past five years has received a fee from the firm; is not a director, partner, officer or employee of an investment or commercial banking firm which in the past five years has performed services for the firm; is not and has not been an officer, director, employee or more than one percent equity owner of a supplier or customer who received more than one percent of its consolidated gross revenued or more than $5,000,000 per year, whichever is less, from a corporate entity affected by this Act. The board of directors collectively shall be provided with such support staff reportable solely to itself, as it deems necessary to fulfill the board's responsibilities.

XVII. REMEDIES AND SANCTIONS

A. CLASS ONE SANCTIONS

1. ENDANGERMENT A corporate official who knowingly conceals a dangerous product or business practice shall be sentenced up to 10 years in prison or fine of $250,000.

2. CORPORATE HOMICIDE A corporate entity or corporate official engaging in conduct where the corporate entity knew or should have known that death could result, or was reckless or negligent, that resulted in death, shall be subject to prosecution under the homicide act of the state.

3. CHARTER REVOCATION Any corporate entity convicted of a Class One Offense shall have its charter revoked or suspended for no less than 30 days. Each additional infraction within a year shall result in a doubling of the suspension period.

4. EQUITY FINES Any corporate entity violating any provision of this Act may be required to authorize and issue to the state treasury shares of stock equal to the value of fines or such number of shares to the state's crime victim compensation fund as would be necessary to deter any violation of this Act. The treasury shall then establish a special crime victim compensation fund, and use the proceeds from the occasional sale on the open market of the accumulated portfolio of the fund to provide money for victims of corporate crimes who would not otherwise be compensated.

The fund directors may liquidate the securities in whatever manner maximizes its return.

 

5. REVOKE TAX ABATEMENTS FOR CORPORATE ENTITIES The state shall be prohibited from providing any corporate entity that is convicted of a Class One Offense from receiving any tax abatements, tax credits or subsidies of any kind for a period of not less than one year.

6. PROHIBIT STATE PURCHASES FROM CORPORATE ENTITIES The state shall be prohibited from purchasing any goods or services from any corporate entity that is convicted of a Class One Offense for a period of not less than one year.

B. CLASS TWO SANCTIONS Any corporate entity that violated any part of this Act may be subject to the following sanctions:

1. REVOKE TAX ABATEMENTS FOR CORPORATE ENTITIES The state shall be prohibited from providing any corporate entity that is convicted of a Class Two Offense from receiving any tax abatements, tax credits or subsidies of any kind for a period of not less than one year.

2. PROHIBIT STATE PURCHASES FROM CORPORATE ENTITIES The state shall be prohibited from purchasing any goods or services from any corporate entity that is convicted of a Class Two Offense for a period of not less than one year.

3. PROHIBIT INVESTMENT IN CORPORATE ENTITY The state may be prohibited from investing state pension funds, any other state controlled funds in any corporate entity that has been convicted of committing a Class Two Offense for a period of not less than one year.

4. PUBLICITY SANCTION Any corporate entity violating any provision of this Act may be required to publicize the details of its offenses in a full page advertisement in the largest paper in the state and the largest paper in any appropriate community.

5. COMMUNITY SERVICE Any corporate entity violating any provision of this Act may be required to undertake a socially useful project using its own skills and expertise.

6. PROBATION For a corporate entity in violation of any provision of this Act, a court in its discretion may give a probation officer such visitorial powers, create such positions within an organization, require such financial and non-financial disclosure or appoint such special receivers as is deemed necessary to protect against repeat offenses.

7. PUNITIVE INJUNCTION Any corporate entity or corporate official violating any provision of this Act may be prohibited from engaging in specified business practices or be required to revamp its internal controls; develop a remedy for a problem introducing state-of-the-art equipment or procedures; revise its screening procedures; use its international facilities to audit the destination of products supplied, to report back to the enforcement agency at periodic intervals and, if necessary, to have those reports verified by an independent monitor.

8. RESTITUTION TO VICTIMS Any corporate entity violating any provision of this Act may be required to pay restitution and/or treble damages to any victim of the offense, and/or any other party [to be determined by the court].

9. PROBATION FOR CORPORATE EXECUTIVES WHO FAIL TO PROHIBIT CIVIL OR CRIMINAL VIOLATIONS BY THE CORPORATE ENTITY When a corporate official is convicted of an offense committed in furtherance of the affairs of the organization, the court may include in the sentence an order disqualifying the corporate official from exercising similar functions in the same and/or other organization for a period not in excess of the authorized term of imprisonment for such offense, if it finds the scope or willfulness of the official's illegal actions make it dangerous or inadvisable for such functions to be entrusted to the official.

Any corporate official who serves on the board of a corporate entity that is convicted of violating any criminal law shall be prohibited from serving on any other board of directors in the state

10. EXECUTIVE DISCLOSURE Any corporate official convicted in a criminal proceeding shall participate in statewide lecture series for grades 9-12. In this lecture series the corporate official will spend at least two hours a day delivering a court approved lecture to students on the need for corporate responsibility and the cost to society of the criminal offense.

C. ACTIONS FOR CIVIL DAMAGES

1. FLUID RECOVERY When a corporate entity has violated a provision of this Act or any other law of the state and direct compensation of individual class members is unfeasible the class-wide damages should be aggregated and a single recovery fund should be created. This class-wide recovery fund shall be used to compensate individual claimants as appropriate, but only to the extent that doing so does not sacrifice the interests of absentee class members - the remainder of any fund should be distributed through cy pres. In selecting the cy pres remedy, the preference should be for equitable trusts that operate to benefit past injured classes and to alleviate the potential for injury to the public in the future.

XVIII. LIABILITY STANDARDS

1. STRICT LIABILITY All corporate entities organized or doing business in the state shall be held strictly liable for damages caused to persons, property or chattel in the event that any product, practice or service causes death, serious bodily harm, or destruction of or damage to property or chattel.

2. REMOVE LIMITED LIABILITY FOR RECKLESS CONDUCT In those instances where the board of directors of any corporate entity subject to this Act have engaged in ultra vires activities (or have been reckless in exercising their oversight duties) the shareholders on a pro rata basis and the directors individually shall be liable for the actions of the corporate entity.

3. ENTERPRISE LIABILITY Affiliated corporate entities involved in a common enterprise should be treated as one entity if they are in reality an integrated economic entity.

Comment: [see Nutshell p.94]

4. TREAT CORPORATE EXECUTIVES AS PUBLIC OFFICIALS IN LIBEL PROCEEDINGS One who utters defamatory speech concerning a corporate official or corporate entity shall be immune from liability notwithstanding the falsity of such speech, unless such speech was made with knowledge of its falsity, or reckless disregard for the truth.

XIX. OTHER PROVISIONS

A. MULTI-STATE TAX COMMISSION The state shall join the Multi-State Tax Commission, a compact of states that share expenses for a joint audit program to ensure full compliance with the state's tax laws.

B. UNITARY APPORTIONMENT AND WORLDWIDE COMBINED REPORTING The state is authorized to take into account a corporate entities' world-wide income, using a formula involving wages, sales and property taxes within the state, and then apportion an appropriate amount of income to the state for tax purposes.

C. CORPORATE OFFICIAL RESPONSIBILITY Where a corporate entity commits an offense under this Act, any corporate official who directed, authorized, assented to, acquiesced in or participated in the commission of the offense is a party to and guilty of the offense and is liable for punishment provided for the offense whether or not the corporate entity has been prosecuted or convicted.

D. BURDEN OF PROOF

1. MANAGER ACCOUNTABILITY A corporate official's guilt is imputed from the conscious disregard or recklessness in not stopping a wrongful act.

2. In any prosecution of an offense under this Act, it is sufficient proof of the offense to establish that it was committed by an employee or agent of the accused, whether or not the employee or agent is identified or prosecuted for the offense.

E. BONDING The Secretary of State may require a corporate entity to post such bond or pay such amount of money into an escrow account as will ensure compliance with any order made pursuant to this Act or in the event the corporate entity becomes insolvent or files for bankruptcy.

XX. EMINENT DOMAIN If at any time corporate entity is in violation of this Act, the Secretary of State may require a corporate entity to show cause as to why its charter should not be suspended and its assets purchased by the state at fair market value.

XXI. ATTORNEY RESPONSIBILITIES In the representation of a corporate entity, an attorney shall not conceal or knowingly fail to disclose that which by law the attorney is required to reveal or disclose.

An attorney shall notify the board of directors of a corporate entity of any violation of this Act or any other law by the client corporate entity in writing within five days of discovering the violation.

XXII. STATUTE OF LIMITATIONS An action to recover damages for personal injury, illness, death or injury to property caused by the latent effects of exposure, direct or indirect, to a substance upon or within the body, or upon or within property, may be commenced within five years from the date of discovery of the injury, illness or death, whichever is later. Provided, however, that where the injury or illness involves damage to the respiratory system or other system, part or function of the body caused by exposure to a substance, the effects of such exposure being latent and not manifested upon exposure but thereafter resulting in a disability, an action or proceeding to recover damages for such injury or illness may be commenced within five years after taused by such exposure.



Model Laws >>  Corporate Decency Act