TESTIMONY On SUB. SB 110
By
LINDA WOGGON
VICE PRESIDENT OF GOVERNMENTAL AFFAIRS
OHIO CHAMBER OF COMMERCE
Before The
HOUSE CIVIL & COMMERCIAL LAW COMMITTEE
REP. JOHN WILLAMOWSKI, CHAIRMAN

October 17, 2001

Rep. Willamowski, and members of the committee, I am Linda Woggon. I serve as Vice President of Governmental Affairs with the Ohio Chamber of Commerce. As I’m sure you know, the Chamber is Ohio’s largest and most diverse statewide business association, representing over 5000 companies of all sizes and from all segments of business and industry.

I am here today, on behalf of the members of the Ohio Chamber, to testify in support of Sub. SB 110, a bill that will make important improvements in our state’s corporate law.

Let me begin by thanking Sen. Ron Amstutz for his willingness to take over sponsorship of this legislation following the departure of Bruce Johnson from the Senate. Also we appreciate the assistance we have received from Chairman Willamowski, his staff, and LSC as we have worked to prepare the substitute bill that is now before this committee.

The Ohio Chamber and the Ohio Manufacturers Association spearheaded the effort to have SB 110 introduced in the Senate earlier this year. Working with a coalition of our member companies who are incorporated in Ohio, we were convinced there are sound public policy grounds for continually ensuring that our corporate governance statutes enhance Ohio’s business climate. That was the goal of the statutory changes included in SB 110. And, although the substitute bill before you today reflects a different approach from the original bill, the goal is the same – ensuring that those companies who call Ohio their corporate home, have the most current statutory tools available to remain healthy contributors to their communities and to our state.

Following Senate passage of SB 110, we began a process of working very closely with the Ohio State Bar Association to address the concerns they raised during Senate deliberations. Sub. SB 110 is the outgrowth of those discussions. In essence it will:

• Strengthen classified (or staggered) corporate boards. These boards are in place in an overwhelming number of public companies in Ohio. Under this approach, board members are divided into three groups of staggered three year terms, so that only one third of the Board turns over at each election. This is an important concept in ensuring continuity of management and enhancing shareholder value. Classified boards also serve as a brake on radical change by opportunistic acquirers. Although they do not prevent takeovers, they do allow time for the remaining directors to protect the interests of minority shareholders. This bill strengthens the classified board concept by adopting the Delaware principal of removal for cause. Since the concept of classified boards is meant to discourage removal of an entire board in one swoop, adding removal for cause provisions to Ohio’s statute makes sense.

• This bill also places limits on the amending process by adding a vote of the majority of the minority. Again, this makes sense since an amending process that easily eliminates classified boards defeats the continuity purpose.

• Finally this bill confirms the authority of directors to redeem shareholder rights plans.

We believe this is a fair, timely and beneficial bill and encourage you to favorably recommend it to the full House.

Thank you, Mr. Chairman. I would be happy to answer any questions you or the other committee members may have. I am by no means an expert on this subject, however, Jim Tobin, who is a corporate law expert and chairs the Tender Offer subcommittee of the Ohio State Bar Association’s Corporate Law committee is here, and would also be glad to answer any questions you may have.