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Sunday, May 4, 2014

"Good Neighbor" Policy

It is past time to return to our local situation and inquire again about the Nanotech industries that are expected to bring new economic growth to this area. To re-cap briefly, we have already taken a basic look at these companies and their projects, first to determine who they are and second, to get some idea of their knowledge of, and experience with, corporate responsibility to the communities they inhabit. It is perhaps not too harsh a statement to say that their record so far is not exactly sterling as far as their contributions or attention to the needs of local communities in which they reside, with the possible exception of IBM. 

Let’s begin with an article from May 22, 2010 in the Austin Texas Statesman. Despite a seven-year contract that Gov. Rick Perry of Texas signed with SEMATECH in 2004, that required SEMATECH to keep it’s “core managerial or operational functions” in Texas, not to negotiate a move of its Texas operations and not to create a new “significant” facility outside of Texas, SEMATECH had three times in eight years announced an expansion in New York. As of the time of this article they were ready to move their largest research operation to Albany NY and had already signed a letter of agreement with NY officials to that effect. Although this kind of behavior is not unheard of in the relation of industries to the communities in which they reside, it is disturbing that written agreements don’t mean much in terms of final outcomes. Too often (and here we cite Remington Arms of Ilion NY), corporations are willing to take state and local money, along with the loyal support of local workers, and throw it all over when they wish to relocate. Communities can complain all they want, even if there was a written agreement in place, but I have never heard of any who got money back after corporations took their proffered money and ran!

So here we have a blatant example of the relation of the lead Nanotech Utica company to its resident community. It does not bode well for the eventual support from SEMATECH of community agencies, projects or infrastructure repair. However, it says to me that the Utica area must work together to do all in its power to ensure that SEMATECH gives back substantial sums in recognition of state forgiveness of taxes, of tax subsidies arranged, and for all the additional monies that will be allocated to keep this Nanotech project growing and prosperous.

In this regard, we ought to admonish New York state legislators to examine this situation and begin to determine the place of state legislation in relation to a “Good Neighbor Policy” for corporations receiving large amounts of state and local dollars. Might as well get some money for Community involvement up-front, because it isn’t going to be there if a corporation decides to leave. Inevitably that brings up the issue of what legislation already exists that obligates big corporate entities to return money and support to the communities in which they reside?

There is a bill called the " Just and Open Business Subsidies (JOBS) Act" - A8203 - that calls for public dollars to be used for the public good. According to a flyer published by a statewide coalition called "Getting Our Money's Worth", New York State "spends $7 billion each year on public subsidies in the name of job creation and economic development, yet too often these subsidies fail to create good local and community benefits." The coalition says the JOBS Act will do the following:

* Prioritize Performance by requiring that proposed development projects set job creation, job quality and local hiring goals before receiving public subsidies.

* Increase Accountability by insuring that all publicly subsidized projects engage community stakeholders and establish a "money-back guarantee" that allows local or state government to recapture subsidies when projects fail to deliver.

*Show Us the Jobs by creating a public website where any New Yorker can track the performance of subsidized projects, by including subsidy spending in a state unified economic development budget and by requiring annual reports and accounting of all projects subsidized by public authorities.

As of 3/25/2014, this bill was re-committed to the Assembly Corporations, Authorities and Commissions Committee. The fact that this bill is languishing in committee should be a wake-up call to all local state representatives. It is time to support this bill and to get it passed before the Texas example of abandonment becomes all-too-common in New York State! Strange that this bill of basic requirements for businesses in regard to subsidies languishes while other legislation has already been passed which requires something in return for subsidies.

For instance, legislation (signed July 18, 2012) to 'Strengthen and Support New York's Craft Breweries' is one version of legislation that provides a tax break, but requires something in return. The New Law exempts Small Breweries from having to Pay an Annual State Liquor Authority Fee, but also Creates a Farm Brewery License to Promote Use of Local Ingredients. The legislation is designed to support New York's breweries and wineries, but also to increase demand for locally grown farm products, and expand industry-related economic development and tourism. Any brewery that produces 60 million or fewer gallons of beer in New York is eligible for a refundable tax credit applied against New York State personal income and business taxes. This at the very least requires the breweries to do something constructive with the farming communities: use their products!

Another small example is "The Power NY Act" that establishes a new process for the siting of electric generating facilities and re-powering projects. The new law encourages investments in clean power plants and affords communities more opportunities to meaningfully participate in the siting process. After years of gridlock, the measure passed with support from industry, environmental advocates, consumer groups, labor and community organizations. At least, the community is involved at the point in the process of choosing sites for facilities. The question becomes: who from the community? That is always the key.

There is also a BILL - A560-2011 – that allows and encourages contributions by public utility corporations to charitable organizations for the benefit of communities serviced by the corporations. It directs the public service commission to formulate and promulgate regulations providing for the establishment and operation of the community support program; includes the goal of encouraging contributions equal to at least one percent of the corporation's revenue. While it doesn’t require community responsibility, it certainly encourages it by clearing the way with regulations, and setting some goals that are challenging.

Next, comes a concept, already written into NY Corporation Law, that calls for the power of for-profit enterprise to solve social and environmental problems. The idea behind Benefit Corporations, or B Corps, “is that when companies have a legal responsibility to all relevant stakeholders — not only shareholders, but also employees, consumers, the environment and the community — their impact is strikingly more positive, and even more profitable.”

New York's legislation was signed into law on Dec. 12, 2011 and was added to Chapter 599 of Corporation Law. This Law authorizes a New York corporation to elect to be a benefit corporation and thus to have as one of its purposes the creation of general public benefit. New York was not the only state to sign this kind of legislation into law; so did California, Hawaii, Maryland, New Jersey, Vermont and Virginia. Five others have introduced similar legislation. In the William Mitchell Law Review, the point is made that there is a substantial marketplace for companies using the power of business to solve societal problems. In fact, we are reminded that approximately 68 million consumers have stated a preference for making purchasing decisions based on their sense of environmental and social responsibility on the part of vendors or companies.

It’s not that the for-profit sector of our economy is shortsighted, evil, or inherently detrimental to the environment and local communities. Rather, publicly-traded companies are often hamstrung by their legal responsibility to maximize shareholder returns, and the ensuing effects on such things as the environment, employee well-being and the community at large can be less than ideal. According to one report, “There are tons of individual companies that have managed to effectively balance social and business impact. Still, we need to institutionalize the values, standards, and accountability that allow companies to do that.”

This Law permits the incorporation in New York of "benefit corporations," which must have a "general public benefit" purpose, defined in the bill as "a material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, through activities that promote a combination of specific public benefits."  Likewise, the bill defines a "specific public benefit" to mean "providing individuals or communities with beneficial products or services; promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; preserving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; increasing the flow of capital to entities with a public benefit purpose; or the accomplishment of any other particular benefit for society or the environment."

The bill allows a corporation to elect to be a benefit corporation by amending its charter to include a statement that the corporation is a benefit corporation. An amendment electing benefit corporation status, and any subsequent termination of benefit corporation status, must be approved by the stockholders. The bill further allows a benefit corporation to identify and include one or more specific public benefits in its charter with the approval of the stockholders.

The bill also requires a benefit corporation to deliver an annual benefit report to all stockholders that includes (1) the ways in which the benefit corporation pursued general public benefit during the preceding year and the extent to which the general public benefit was created; and (2) the ways in which the benefit corporation pursued any specific public benefit included in its charter and the extent to which that specific public benefit was created. The annual report must also discuss "circumstances hindering the benefit corporation's ability to create the public benefit and an assessment of the societal and environmental performance of the benefit corporation.”

Section 4 of the bill amends section 720 of the business corporation law to include actions against directors and officers for misconduct which are unique to benefit corporations. Such actions include (1) the failure to pursue the general public benefit purpose of a benefit corporation or any specific public benefit set forth in its certificate of incorporation, (2) the failure by a benefit corporation to deliver or post an annual report, or (3) the neglect of, or failure to perform, or violation of his or her duties or standard of conduct under article 17.

Thus, in New York state we already have a legal basis for approaching the Nanotech companies about increasing their social responsibility footprint. It is a big challenge, but one worth considering, that one or more of these Nanotech companies might be able to be convinced to become a “Benefit Corporation.”

There is one more avenue to consider. Now that NYS has a law that inculcates the concept of social and environmental responsibility as part of a business incorporation and mission, it might be possible to acquire the support of state legislators for a bill that encourages corporations and companies to consider adopting a well-defined “Good Neighbor Policy.”

An article written for the Online Free Library, calls Good Neighbor agreements "a tool for environmental and social justice," and sets the scene for why these agreements have transpired. As health and environmental hazards have emerged from industrial production, communities have become more aware of the negative role corporations can play in undermining community welfare. The whole issue of "fracking" for example has come to the forefront in communities that fear what that process can do to ground water, farmland, wells, and even community water plants. Because there is very little real accountability on the part of major corporations (gas & oil companies, for example) for decisions made that affect local communities, citizen groups throughout the country have raised their voices and organized to try and combat some of the detrimental effects of what may be viewed as out-of-control industrial practices.

Secondly, the downsizing and layoffs that have escalated in many U.S. communities have forced communities to be more aware of the negative role that corporations can play when they move their operations to other states, or to other countries, without one wit of concern for the communities they have left behind. Some groups have tried to build some legal accountability into corporate subsidy agreements, but as we have seen in the case of Texas, sometimes corporations simply ignore these provisions by making up scenarios that skirt their so-called "obligations." .

It is, of course, important to remember that corporations do not like regulations and agreements that stifle their profitability. So, in terms of legal means built into these agreements, corporate lobbying campaigns have targeted lawmakers with aggressive campaign tactics and donations to stem any tide of increased regulatory control. Thus community groups are at a seeming disadvantage when it comes to exerting legal controls over industrial corporations.

So, while some community groups are content with attempting limited legal measures, such as zoning, or suing under a nuisance law, or under various environmental statutes, or seeking negotiation under contract law which provides some remedy for breach of contract or a set of promises which can be recognized as a duty, several community welfare groups have taken on themselves the task of promoting non-legally binding Good Neighbor Agreements.

The philosophy common to all Good Neighbor Agreements is "the industry's and community organization's mutual acknowledgment of the need to build a relationship responsive to community and industry needs." Some of the provisions suggested for inclusion in an agreement are as follows:
Community access to information (defined differently in different agreements). It could be placed online, or in a local library, or simply available from the company.
Right to inspect the facility. Community groups aren't usually given such access, so this could be a controversial provision, especially since federal law does not require that such visits be allowed. Since unions sometimes have routine inspections written into their agreements, it may be possible and prudent to partner with labor in this effort.
Accident Preparedness. A plan for procedures the company will undertake if an accident occurs, should be forged with community input and review.
Pollution prevention. Use of experts here may be in order, but those experts should be made accountable to the community. A plan to reduce toxic emissions or toxic wastes over a certain period is the goal here.
Good jobs, local jobs, union jobs. The community group may want to push the company in areas of job training and hiring in the local community by actually recruiting local people for new openings. If the work force is not unionized, some have worked toward a simple "card-check" election process.
Local economic needs. A special community benefits fund might be established or spending in other community organizations that will enhance the lives of community members. Expanded funding of local infrastructure repair might be included.
Citizen Group concessions. help settle open litigation, permit challenges, or end negative publicity
On-going communication and assessment is essential to continued compliance. Meetings, annual reports, a regular report on provisions in the agreement for the public would all be helpful.

The JOBS Act in the State Assembly would go a long way toward the implementation of these concepts. Meanwhile, it is probably a very good idea to try to build-in links with certain processes which might make the agreement legally enforceable, even before a state law is passed. For instance, it could be linked in to the local permit process by which permits for construction, digging, filling, etc., are used as leverage for confronting a company that strays from the implementation of its commitments. The requirement of a broad audit might be written into the agreement in order to have outside auditors look at the specs of the agreement as part of its audit, indicating where the company (or community organization) has failed to live up to promises made. Such an audit could be made public if so designated in the agreement.

However, it is suggested in this article that "even a binding agreement does not necessarily mean that the firm will in reality be a "good neighbor." It is to be remembered that many corporations that have signed agreements have continued to endanger the community and their workforce with hazards that have not been addressed. Sometimes companies re-interpret provisions of such agreements to their own advantage; or delay implementation of certain provisions. It should be no surprise, then, that the cited article stresses the following: "Corporations still 'call the tune' in most communities. Big corporations act like '800-pound gorillas' who know they are free to decide where and how they will 'sit down.' People who wish to change this situation must find whatever leverage is available to support local pressure to negotiate."

In light of all of this, the article suggests that the term "Good Neighbor" Agreement may not be the most appropriate term to use. Instead, it is suggested that a more neutral term might simply be "a Corporate-Community Compact." These agreements or compacts must be viewed not as the final solution to corporate-community relationships. They are simply supplements or alternatives to strict, effective federal and state laws, regulation and enforcement. In the end, what all concerned communities must strive toward is new laws, and new methods of oversight, that grant local, affected citizens non-negotiable rights to oversee industries that endanger them, and to assure job and income security for community members, especially when industries close and move elsewhere; and, to negotiate pay-back money and projects for the breaks and subsidies that these corporations have extracted from local, state and federal coffers, and from our pocket-books and wallets.