By Eric Jackson, Senior Contributor09/01/10 - 09:16 AM EDT
The Securities and Exchange Commission last week passed something called "proxy access" which will allow shareholders to nominate directors for election to the board in a simpler and less expensive process. The move is being hailed as a major victory by shareholder advocates promoting stronger governance standards. It's taken 30 years of debate to get this change out of the SEC so I agree that any change in a positive direction toward open access is good. However, I fear that proxy access will actually be much ado about nothing due to unrealistically high requirements.
The principle behind the need for proxy access is pretty simple (at least in my mind) -- management shouldn't have a stranglehold on selecting the board of directors who ultimately holds management accountable, which I define as being able to hire and fire company executives. Prior to proxy access, the only recourse shareholders had to remove terrible directors was to run a full-blown proxy contest which can run several millions of dollars after all the lawyers and other service providers get paid. Most shareholders, save Carl Icahn, have not chosen this path.Sphere: Related Content