BILL NUMBER: SB 1632 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 4, 2004
AMENDED IN SENATE APRIL 22, 2004
AMENDED IN SENATE APRIL 13, 2004
INTRODUCED BY Senator Figueroa
FEBRUARY 20, 2004
An act to add Sections 2254.5 and 17108 to the Corporations
Code, and to add Section 7513.7 to the Government Code,
relating to public pension systems.
LEGISLATIVE COUNSEL'S DIGEST
SB 1632, as amended, Figueroa. Public pension systems:
investments.
Existing law declares that the retirement boards of public pension
and retirement systems have fiduciary responsibility over the assets
of the public pension or retirement systems.
This bill would require the public pension systems within the
state, to the extent feasible, to obtain specified information from a
corporation if the stock of the corporation is held by the system,
as specified; to report to the Legislature regarding that
information; and to make that information available to the public,
except in certain circumstances. The bill would provide that a
corporation that submits information to those systems that it knows
or should know is false or contains material misrepresentations of
fact may be subject to a $10,000 civil penalty. The bill would
make related findings and declarations.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares as follows:
(a) California, as the sixth largest economy in the world,
attracts multinational corporations from throughout the globe and its
consumers and investors have tremendous influence on the environment
and public health worldwide.
(b) As the business activities of multinational corporations
extend across the globe, the practices of these corporations
increasingly affect the environment, public health, labor and human
rights of communities everywhere.
(c) Californians have little or no access to critical information
on corporate practices in California and abroad, as corporations
often are not required to publicly disclose their overseas
environmental, human rights, and labor practices, even though they
may be employing practices that violate human rights or are harmful
to communities or the environment.
(d) The disclosure of relevant information, both financial and
nonfinancial, is central to the ability of consumers and shareholders
to make sound economic decisions. Studies increasingly show that
good management of environmental and social issues is linked to good
overall management practices.
(e) Current securities disclosure rules and the Securities and
Exchange Commission do not provide adequate instruction and
enforcement to ensure that companies disclose the full scope of
potential material risks and liabilities stemming from environmental
or social harms. Poor disclosure or lack of disclosure of social and
environmental risks and liabilities can constrain proper risk
analysis and threaten shareholder value.
(f) Fiduciaries who manage funds for public pension systems, such
as the Public Employees' Retirement System and the State Teachers'
Retirement System, need better and more comprehensive information
about corporate environmental and social practices in order to
evaluate a company's internal controls, financial risks, and earnings
potential.
SEC. 2. Section 2254.5 is added to the Corporations Code, to
read:
2254.5. Any corporation that submits information to a public
pension system in the state pursuant to subdivision (a) of Section
7513.7 of the Government Code that it knows or should know is false
or that contains material misrepresentations of fact is subject to
the penalty provisions under subdivision (f) of Section 7513.7 of the
Government Code.
SEC. 3. Section 17108 is added to the Corporations Code, to read:
17108. Any limited liability company that submits information to
a public pension system in the state pursuant to subdivision (a) of
Section 7513.7 of the Government Code that it knows or should know is
false or that contains material misrepresentations of fact is
subject to the penalty provisions under subdivision (f) of Section
7513.7 of the Government Code.
SEC. 4. Section 7513.7 is added to the Government Code, to
read:
7513.7. (a) Each public pension system in the state shall, to the
extent feasible, request the following information from any
corporation described in subdivision (b):
(1) Whether the corporation has adopted and monitors compliance
with international human rights standards, including the
International Labor Organization's Core Labor Principles, as
expressed in its Declaration on Fundamental Principles and Rights at
Work.
(2) Whether the corporation has been cited or penalized for public
health or human rights, environmental, employment, consumer
protection, or corruption-related violations abroad or domestically
and, if so, the cumulative value of the penalties.
(3) Whether the corporation has adopted an environmental
management system or is a member of CERES or the Global Reporting
Initiative, to ensure that its facilities, contractors, and key
subcontractors are environmentally responsible.
(b) This section shall apply to any corporation if the capital
stock of the corporation is held within the internal equity index
fund of an investment portfolio of the respective public pension
system . system. This section does not
apply to small businesses as defined by the Small Business
Administration.
(c) Each public pension system shall report to the Legislature
regarding the corporate information received pursuant to this section
and shall make that information available to the public by whatever
means the system deems feasible, including posting the information on
the system's Web site, unless to do so would be inconsistent with
the system's fiduciary duties to its members and retirees.
(d) Nothing in this section shall be construed to limit the
ability of a public pension system to execute its fiduciary duty,
including its ability to diversify investments, or to require any
public pension system to make any investment decision or to impose
different or additional criteria on existing or potential
investments.
(e) Any action taken by a public pension system with respect to a
corporation that fails to provide the information requested under
this section shall be consistent with the system's fiduciary duty to
act as a prudent investor.
(f) A corporation that submits information under this section that
it knows or should know is false or contains material
misrepresentations of fact may be subject to liability for
damages or equitable relief under applicable provisions of law.
a civil penalty not exceeding ten thousand dollars
($10,000) for every violation. An action under this subdivision may
be filed only by the Attorney General, a district attorney, or a city
attorney.