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Corporate Governance

: The Harvard Law School Corporate Governance Blog

Don?t Gut Proxy Access

By Harvard Law School Program on Corporate Governance

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Editor?s Note: This post is based on a op-ed article by Lucian Bebchuk published today on the New York Times? Dealbook, available here. Lucian Bebchuk is a professor of law, economics and finance at Harvard Law School and author of ?The Case for Shareholder Access to the Ballot,? ?The Myth of the Shareholder Franchise? and ?Private Ordering and the Proxy Access Debate.?

The Senate?s representatives on the conference committee finalizing financial regulatory overhaul have proposed weakening the proxy-access provisions included in both the House and Senate bills. The senators? amendment would prevent shareholders owning less than 5 percent of a company?s shares from ever placing director candidates on a corporate ballot.

Hard-wiring such an ownership threshold in the financial regulatory bill would be a significant setback for shareholders and corporate governance reform.

While shareholder power to elect new directors is supposed to serve as a foundation for our system of corporate governance, American shareholders seeking to replace incumbent directors face considerable legal impediments. Lowering these impediments would make directors more focused on shareholder interests. The case for doing so is supported by empirical evidence indicating that arrangements increasing directors? insulation from removal are associated with lower company value and worse performance.

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Full post as published by The Harvard Law School Corporate Governance Blog on June 21, 2010 (boomark / email).