Wednesday, October 16, 2002

Business drives Issue 2 campaign

Labor not in favor of law changes

By Patrick Crowley
The Cincinnati Enquirer

Corporate greed. Wall Street scandals. A fear that business is too cozy with government and overwhelming the interests of the public.

In the minds of many, that's the state of corporate America today. But similar concerns about big business more than 100 years ago motivated state lawmakers to load the state's Constitution with restrictions and regulations on corporations.

Easing those restrictions will be a question for Kentucky voters on Election Day 2002. They are on the Nov. 5 ballot as Constitutional Amendment 2, or “Issue 2.”

“There was a tremendous distrust in Kentucky and across the country of the very same corporations that President (Theodore) Roosevelt eventually attacked with anti-trust laws in the early 1900s,” said Henry L. Stephens, a professor at the Salmon P. Chase College of Law at Northern Kentucky University.

“So provisions were added to the Constitution that were designed to protect Kentuckians against the railroads an the coal companies coming in from the East,” Mr. Stephens said. “They were seen as potentially pillaging, raping and plundering without those provisions."

Those changes aimed at reigning in and regulating corporations were added to the Constitution, originally drafted when Kentucky achieved statehood in 1792, by lawmakers in 1891.

One hundred and eleven years later, those provisions, while meaningful at the time, have lost their relevance - and instead of regulating corporations, are now actually stifling business growth in Kentucky, according to a business-led group pushing for their removal on Election Day.

“Kentucky's constitutional regulations on corporations were written before the age of the automobile,” said Gary Toebben, president of the Northern Kentucky Chamber of Commerce, a member of the coalition pushing for the changes.

“We must give the legislature the power to write new regulations that make us competitive in today's economic development,” Mr. Toebben said.

Constitutional Amendment 2 will appear on the ballot with this language:"Are you in favor of permitting the General Assembly to provide by general law for the formation, organization and regulation of corporations by repealing certain sections of the Constitution of Kentucky relating to corporations?"

A “yes” vote supports the proposed changes, throwing out the restraints put in earlier; a “no” vote opposes amending the Constitution and keeps them in the Constitution.

If the amendment passes, here are some of the provisions that will be eliminated from the Constitution:

m If a company purchases real estate and does not use it for businesses purposes in five years, the property must be turned over to the state. m Companies cannot communicate electronically with shareholders.

m Kentucky companies cannot merge with foreign companies, leaving the jurisdiction of the state courts.

m Provisions dealing with how corporate charters are granted and how stock is issued.Even proponents admit that many of the provisions - including the state seizing unused corporate property or real estate - are so outdated they are not enforced.

Updating the constitution would improve Kentucky's business climate by attracting more corporations, jobs and investment to the state, proponents claim.

“We need to take the shackles off business and allow Kentucky to compete with other states for jobs and opportunities,” said Judge J. William Howerton, former chief judge of the Kentucky Court of Appeals.

Judge Howerton as well as professor Stephens served on a 1987 Blue Ribbon Commission on Constitutional Review that recommended 77 changes to the Constitution. Eliminating restrictions on business was fourth among the recommendations.

The amendment is supported by a broad coalition of businesses, Kentuckians for Employment and Economic Progress. Among the most ardent backers is Covington-based Ashland Inc., which contributed nearly $3 million to the campaign for passage of the amendment.

The campaign is running television ads on the issue on stations in the Cincinnati/Northern Kentucky market.

Ashland spokesman Stan Lampe said there is a reason only two New York Stock Exchange-listed companies - Ashland and NS Group in Newport - are incorporated in Kentucky.

“There are parts of the constitution that need to be changed because they create a negative business environment,” Mr. Lampe said. “Look at Kentucky now. We have an excellent labor climate, an excellent location for doing business in the rest of the country - but we aren't getting the big corporations to locate here because we haven't modernized our laws."However, the man charged with attracting corporations and jobs to Kentucky believes the amendment's proponents may be slightly over-selling its importance.

Gene Strong said he does support the amendment.

“I believe we should promote this as a positive modernization of our Constitution,” Mr. Strong said. “I don't think we should raise any flags that all of these good things are going to happen because of it."

Mr. Strong also refutes claims that language in the Constitution has persuaded companies to locate elsewhere.

“In the time I've been here, I've never had a comment that 'I'm not coming to Kentucky because of your constitutional restriction.' ”

The most vocal opponent to the amendment has been organized labor, which opposes less scrutiny of corporate America.

Bill Londrigan, president of the Kentucky AFL-CIO, has been suspicious that Ashland and other companies have been so eager to promote and fund the campaign to pass the amendment. “What does (Ashland) hope to gain?”

He fears corporations will be able to use the changes as well as its clout in Frankfort to promote laws that favor corporate interests over that of shareholders, employees and the public.

Mr. Londrigan has also questioned why the ballot language is so vague. And he has pointed out that the legislation placing the amendment on the ballot was passed - albeit unanimously - by the General Assembly on the last day of the 2002 legislative session and included in a bill with no mention of a constitutional amendment in its title.

“What Kentucky doesn't need are secret deals financed by corporations to change laws and regulations to give them more rights and privileges,” Mr. Londrigan said. “In the wake of Enron and the movement for improved corporate accountability and governance, Amendment 2 is a step backward."

Mr. Stephens said he doesn't disagree with Mr. Londrigan's point about the need for more corporate accountability. But leaving the constitution intact will not “accomplish anything in that regard.”

“This is a good amendment,” Mr. Stephens said.

The Associated Press contributed.


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