Capitol Insider Blog Posts Examine Styrofoam, Corporate Board Quotas

Two recent posts, reprinted below, examine the politics behind styrofoam container legislation and a proposal to set a quota of women members for the boards of publicly traded corporations headquartered in California.

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Environmental Groups on Styrofoam Containers: Ban or Bust

By Adam J. Regele, CalChamber Policy Advocate

A number of California bills (SB 568; SB 705; SB 1335) have been introduced over the years targeting non-recyclable polystyrene single-use containers, commonly known by the brand name Styrofoam.

Proponents of these bills consistently argue non-recyclable, single-use Styrofoam containers pollute the environment and fill California landfills. It is surprising then, a bill introduced this year specifically addressing those concerns was killed by these very same proponents.

Assembly Member Evan Low (D-Silicon Valley) was forced to pull his AB 2921 recently after fierce opposition from environmental organizations.

AB 2921 would have created the Expanded Polystyrene Food Service Packaging Recovery and Recycling Act. The act sought to impose additional fees on manufacturers to fund public programs that increase community access to recycling centers and promote efforts to recycle and reduce expanded polystyrene single-use containers going into our landfills and natural environment.

The bill was consistent with California law mandating a 75% statewide waste diversion goal by 2020 and consistent with the rationale articulated in earlier bills supported by these same environmental organizations.

Expanded polystyrene single-use containers are 100% recyclable and can be compacted and transformed into items like clothes hangers, park benches, flower pots, toys, rulers, stapler bodies, seedling containers, picture frames, architectural molding and back into containers. Alternatives such as paper foodservice disposables, on the other hand, are rarely recycled.

This begs the question, why would these organizations now oppose a bill providing more funding for recycling and the diversion of expanded polystyrene entirely paid for by manufacturers?

As the tale of AB 2921 makes clear, these organizations are no longer drawing any distinction between non-recyclable and recyclable Styrofoam. The battle line over polystyrene single-use containers has been redrawn and environmental groups are now positioning as a ban or bust on this issue.

Legislating Is Hard When Up Against Reality

By Loren Kaye, President, California Foundation for Commerce and Education
Lawmaking would be a lot easier if the real world didn’t intrude.

Take SB 826, a bill by Senator Hannah-Beth Jackson (D-Santa Barbara) that would set a quota of women board members for publicly traded corporations that are headquartered in California. Troubled that women amount to more than half the population, but only lightly populate corporate boards, her bill would fine these corporations if women did not comprise about half the board seats (depending on the size of the board) by 2021.

Here’s where the real world inconveniently steps in.

• First, change is happening on corporate boards.

According to the Harvard Law School Corporate Governance Forum, the percentage of women currently holding Fortune 500 board seats has increased by 21.2% since 2012, and the number of Caucasian/white men has decreased by 6.4%. At the current rate of progress, the number of women and minorities may increase to 40% (a target percentage set by the Alliance for Board Diversity) by year 2026, assuming that the percentage of Caucasian/white men on boards continues to decrease by 0.9% per year. This trend is happening without government interference.

• Second, where government has tried to mandate board diversity, the results haven’t been very impressive. Beginning with Norway a decade ago, several European nations implemented mandatory gender quotas for corporate boards. (The penalty was corporate dissolution, so compliance was high.) Yet, according to a survey of these mandates in the Economist, “the evidence so far also undermines the business case for quotas. Studies from at least six countries on companies’ performance, decision-making and stock market returns fail to show that quotas make a consistent difference, good or bad.”

• Third, mandating gender quotas is probably unconstitutional. The equal protection clauses of both the United States and California constitutions prohibit job discrimination on the basis of, among other things, gender. In particular, the California Constitution states, “A person may not be disqualified from entering or pursuing a business, profession, vocation, or employment because of sex, race, creed, color, or national or ethnic origin.”

• Fourth, the bill steps all over the modern, common law “internal affairs doctrine,” a tradition memorialized in a California statute that corporate governance is ruled by the law of the state of incorporation—to avoid multi-state companies having to reconcile conflicting laws in the states in which they do business.

• Finally, the bill betrays a fundamental ignorance as to how corporate directors are selected. As one state senator remarked during a hearing on the bill, “We hold the power of government. When is it appropriate for government to make these decisions? Directors aren’t determined by corporations; they’re determined by shareholders.” No statute can force a shareholder to cast a particular vote.

Sadly, reality so far has not been an impediment to this bill, which has advanced through two policy committees and is awaiting its fate in the Senate’s fiscal committee.