BILL NUMBER: SB 310 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Peace
FEBRUARY 4, 1999
An act to add Section 248 to the Public Utilities Code, relating
to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 310, as introduced, Peace. Public Utilities Commission:
corporations.
Existing law generally requires the business and affairs of a
corporation to be managed, and all corporate powers to be exercised,
by or under the direction of a board of directors. Existing law
imposes fiduciary obligations on a director, as prescribed,
including, but not limited to, the duty to perform in good faith, in
a manner that director believes to be in the best interests of the
corporation and its shareholders. Under other existing law, the
Public Utilities Commission is vested with regulatory authority over
public utilities, including specified corporations that perform a
service for, or deliver a commodity to, the public.
This bill would prohibit the commission from enacting or
implementing any decision, order, or rule that interferes with the
rights and obligations of the directors of a corporation, including a
utility holding company, to efficiently and effectively discharge
their fiduciary obligations to the corporation's shareholders, as
specified. The bill would make related legislative 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. Section 248 is added to the Public Utilities Code, to
read:
248. (a) The Legislature finds and declares all of the following:
(1) The overall governance of a California corporation, including
a utility holding company, is entrusted to its board of directors,
who serve in a fiduciary capacity as representatives of the
shareholders.
(2) Chapter 3 (commencing with Section 300) of Division 1 of Title
1 of the Corporations Code describes the rights and obligations of
California corporations. Section 300 of the Corporations Code
requires directors to manage the business and affairs of the
corporation. Section 300 of the Corporations Code further requires
all corporate powers to be exercised by or under the direction of the
board. The board may delegate the management of the day-to-day
operation of the business of the corporation to a management company
or other person if the business and affairs of the corporation will
be managed and all corporate powers will be exercised under the
ultimate direction of the board.
(3) Section 309 of the Corporations Code requires a director to
perform the duties of a director, including duties as a member of any
committee of the board upon which the director serves, in good
faith, in a manner that the director believes to be in the best
interest of the corporation and its shareholders, and with the care,
including reasonable inquiry, that an ordinarily prudent person in a
like position would use under similar circumstances.
(4) To facilitate the director's ability to carry out his or her
duties, Section 1602 of the Corporations Code gives each director an
absolute right at any reasonable time to inspect and copy all books,
records, and documents of every kind and to inspect the physical
properties of the corporation of which that person is a director and
also of its subsidiary corporations, domestic or foreign.
(5) Directors have a duty to make informed judgments, a duty to
question officers of the corporation and its subsidiaries and, in
general, have a duty before acting to inform themselves of all
material information reasonably available.
(6) Having directors serve on the boards of subsidiaries is a
common practice employed by corporations to ensure that directors
receive the information necessary for them to fulfill their
obligations to shareholders.
(7) The commission has adopted affiliate transaction rules to
facilitate the establishment of a competitive energy marketplace by
ensuring that utilities do not engage in anticompetitive behavior.
(8) The adoption and enforcement by the commission of rules
against self-dealing, cross-subsidization, market power, and other
anticompetitive activities, however, must not interfere with the
ability of a utility holding company to efficiently and effectively
discharge its fiduciary responsibilities to its shareholders.
(b) The commission may not enact or implement any decision, order,
or rule that interferes with the rights and obligations of the
directors of a corporation, including a utility holding company, to
efficiently and effectively discharge their fiduciary obligations to
the corporation's shareholders, including, but not limited to, those
requirements imposed by Sections 300 and 309 of the Corporations
Code.