Professor Bainbridge...on law, politics, religion, culture & food

Feeds and Other Site News

I am in the process of joining a new (to me) blogger advertising network, whose contract requires me to offer truncated feeds. Hence the change that some of you have already noted with disapprobation. Sorry!

Anyway, there will be some minor changes to the sites to accomodate the newtork’s preferred formats. Also, I’ll be taking advantage of this opportunity to improve the site’s appearance and performance in several ways.

Suggestions are welcome.

Does Dodge v Ford Motor Co Remain Canon?

My friend and UCLAW colleague Lynn Stout has posted to SSRN a provocative paper: Why We Should Stop Teaching Dodge v. Ford:

Among non-experts, conventional wisdom holds that corporate law requires boards of directors to maximize shareholder wealth. This common but mistaken belief is almost invariably supported by reference to the Michigan Supreme Court’s 1919 opinion in Dodge v. Ford Motor Co.

This Essay argues that Dodge v. Ford is bad law, at least when cited for the proposition that maximizing shareholder wealth is the proper corporate purpose. As a positive matter, U.S. corporate law does not and never has imposed a legal obligation on directors to maximize shareholder wealth. From a normative perspective, options theory, team production theory, the problem of external costs, and differences in shareholder interests all suggest why a rule of shareholder wealth maximization would be bad policy and lead to inefficient results.

Courts accordingly treat Dodge v. Ford as a dead letter. (In the past three decades the Delaware courts have cited the case only once, and then on controlling shareholders’ duties to minority shareholders). Nevertheless, legal scholars continue to teach and cite it. This Essay suggests that Dodge v. Ford has achieved a privileged position in the legal canon not because it accurately captures the law - it does not - or because it provides good normative guidance - it does not - but because it serves professors’ need for a simple answer to the question, What do corporations do? Simplicity is not a virtue when it leads to misunderstanding, however. Law professors should mend their collective ways, and stop teaching Dodge v. Ford as anything more than an example of how courts can go astray.

Lynn’s article should be read in companion with Todd Henderson’s piece, Everything Old is New Again: Lessons from Dodge v. Ford Motor Company, which argued that:

Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn’t that interesting.

But Dodge is a part of the corporate law canon because it is about much more than this. This essays shows that what the Michigan Supreme Court did was actually an elegant solution to a complex legal and policy issue. The history of case and the parties also shows how many prominent aspects of corporate law and practice have long and under-appreciated histories.

and Gordon Smith’s piece The Shareholder Primacy Norm, which argued that:

Corporate directors have a fiduciary duty to make decisions in the best interests of the shareholders. This aspect of fiduciary duty is often called the shareholder primacy norm. Legal scholars generally assume that the shareholder primacy norm is a major factor considered by boards of directors of publicly traded corporations in making ordinary business decisions and that changing the shareholder primacy norm would have an effect on the substance of those decisions. This Article challenges this view and argues that the shareholder primacy norm was never equipped to mediate conflicts between shareholders and nonshareholder constituencies of a corporation. The origins and development of the shareholder primacy norm suggest that it was introduced into corporate law to perform a much different and somewhat surprising function: the shareholder primacy norm was first used by courts to resolve disputes among majority and minority shareholders, and over time this use of the shareholder primacy norm evolved into the modern doctrine of minority oppression. This application of the shareholder primacy norm seems incongruous today because minority oppression cases involve conflicts among shareholders, not conflicts between shareholders and nonshareholders. Nevertheless, when early courts employed rules requiring directors to act in the interests of all shareholders (not just the majority shareholders), they were creating the shareholder primacy norm. Once used to resolve minority oppression cases, the shareholder primacy norm easily found its way into cases involving publicly traded corporations because courts did not routinely distinguish closely held corporations from publicly traded corporations until the middle of this century. But the application of the shareholder primacy norm to the ordinary business decisions of publicly traded corporations is muted by the business judgment rule. As a result, even though the shareholder primacy norm is closely associated with debates about the social responsibility of publicly traded corporations, it’s impact on the ordinary business decisions of such corporations is extremely limited.

I don’t buy it. From my article Director Primacy: The Means and Ends of Corporate Governance:

To what extent should the fiduciary duties of corporate directors permit them, or even require them, to consider nonshareholder interests when making corporate decisions? Corporate law’s classical answer famously was articulated in Dodge v. Ford Motor Co. [FN138] In this case, Henry Ford embarked on a plan of retaining earnings and lowering prices, while improving quality *575 and expanding production within his firm. At trial, Ford’s testimony left the court with the impression that Ford believed “the Ford Motor Company has made too much money, has had too large profits, and that, although large profits might be still earned, a sharing of them with the public, by reducing the price of the output of the company, ought to be undertaken.” [FN139] Ford further explained that his “ambition” was “to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting the greatest share of our profits back in the business.” [FN140] The plaintiff Dodge brothers therefore contended that an improper altruism towards his workers and customers motivated Ford. The court agreed, strongly rebuking Ford:

A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes. [FN141]

Consequently, “it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others.” [FN142] Dodge’s theory of shareholder wealth maximization has been widely accepted by courts over an extended period of time. Almost three quarters of a century after Dodge, the Delaware Chancery Court similarly opined: “It is the obligation for directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders.” [FN143] Although*576 some scholars claim that directors do not adhere to the shareholder wealth maximization norm, the weight of the evidence suggests the contrary. [FN144] First, shareholder wealth maximization is not only the law, but also is a basic feature of corporate ideology. A 1995 National Association of Corporate Directors (NACD) report stated: “The primary objective of the corporation is to conduct business activities with a view to enhancing corporate profit and shareholder gain.” [FN145] A 1996 NACD report on director professionalism set out the same objective, without any qualifying language on nonshareholder constituencies. [FN146] A 1999 Conference Board survey found that directors of U.S. corporations generally define their role as running the company for the benefit of its shareholders. [FN147] The 2000 edition of Korn/Ferry International’s director survey found that when making corporate decisions, directors most frequently ranked shareholder interests as their primary concern, although it also found that a substantial number of directors feel a responsibility towards stakeholders. [FN148]

[FN138]. 170 N.W. 668 (Mich. 1919).

[FN139]. Id. at 683-84.

[FN140]. Id. at 683.

[FN141]. Id. at 684.

[FN142]. Id.

[FN143]. Katz v. Oak Indus., 508 A.2d 873, 879 (Del. Ch. 1986). For an interesting interpretation of Dodge that the shareholder wealth maximization norm originated as a means for resolving disputes among majority and minority shareholders in closely held corporations, see D. Gordon Smith, The Shareholder Primacy Norm, 23 J. Corp. L. 277 (1998). I am skeptical of Smith’s interpretation. In the first instance, the court’s own analysis in Dodge is not limited to close corporations. Smith places considerable emphasis on the sentence immediately preceding the court’s statement of the shareholder wealth maximization norm. See id. at 319 (using italics for emphasis). In that sentence, the court draws a distinction between the duties Ford believed he and his fellow stockholders owed to the general public “and the duties which in law he and his codirectors owe to protesting, minority stockholders.” Dodge, 170 N.W. at 684 (emphasis added). On its face, the duty to which the court refers is that of a director rather than the duties of a majority shareholder. (Admittedly, both the specific passage in question and the opinion in general are sufficiently ambiguous to permit Smith’s interpretation.) In the second instance, whatever Dodge originally meant, the evolutionary processes of the common law have led to Dodge being interpreted as establishing a basic rule for boards of directors, namely, that the board has a duty to maximize shareholder wealth. In Long v. Norwood Hills Corp., 380 S.W.2d 451 (Mo. Ct. App. 1964), for example, the court observed:

Plaintiff cites many authorities [including Dodge] to show that the ultimate object of every ordinary trading corporation is the pecuniary gain of its stockholders and that it is for this purpose the capital has been advanced.... All of these cases involve either banking, commercial or manufacturing corporations and in most of them alleged misappropriation of the assets of the corporation or misconduct of the majority stockholders or boards of directors have been alleged.

Id. at 476 (emphasis added). The court further stated that it had “no quarrel with plaintiff insofar as the rules of law stated therein govern the actions of majority stockholders and the boards of directors of corporations.” Id. (emphasis added). As Smith himself concedes, moreover, his interpretation departs from the “consensus” of most corporate law scholars. Smith, supra, at 283.

[FN144]. See, e.g., Blair & Stout, Team Production Theory, supra note 26, at 286; Smith, supra note 143, at 290-91.

[FN145]. Nat’l Ass’n of Corporate Dirs., Report of the NACD Blue Ribbon Commission on Director Compensation: Purposes, Principles, and Best Practices 1 (1995) (noting, however, that “long-term shareholder gain” requires “fair treatment” of nonshareholder constituents).

[FN146]. See Nat’l Ass’n of Corporate Dirs., Report of the NACD Blue Ribbon Commission on Director Professionalism 1 (1996).

[FN147]. Conference Bd., Determining Board Effectiveness: A Handbook for Directors and Officers 7 (1999).

[FN148]. Korn/Ferry Int’l, 27th Annual Board of Directors Study 33-34 (2000).

Update: To be clear, when I said “I don’t buy it,” I did not intend to single out Gordon Smth’s important contribution to the debate. To the contrary, I had in mind Stout as much as Smith.

In any case, as I observed on Gordon’s site:

Two thoughts. First, Daniel Boorstin observed that “Disagreement produces debate but dissent produces dissension. ... People who disagree have an argument, but people who dissent have a quarrel.” I trust that we have an argument rather than a quarrel.

Second, Dodge reminds me of Charles Dickens’ infamous case of Jarndyce and Jarndyce: “This scarecrow of a suit, has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least; but it has been observed that no two Chancery lawyers can talk about it for five minutes, without coming to total disagreement as to all the premises.”

The Faculty Lounge

The Faculty Lounge is a new law professor blog:

A little over six months ago I took a break from blogging, leaving Concurring Opinions and focusing on my job as an associate dean of Drexel University’s new law school.  We’ve had a hectic fall, working relentlessly on hiring while remaining focused on the essential task of earning provisional accreditation from the ABA.  Neither task is yet complete, but the intensity has a eased a bit.  And to be honest, I missed blogging.  So I set out to find a new space for myself in the blogosphere.  In the course of that search I came upon friends and fellow travelers with the same urge.  We imagined a blog that shamelessly embraced both high theory and pop culture.  A blog that accepted the all-too-true reality that everyone is too damn busy to read anything that isn’t engaging.  A blog with multiple voices, some newer and some older. 

It seemed to me that we wanted to recreate the experience of a faculty lounge.  Where sometimes people are talking about a great new paper on SSRN, other times they’re lamenting the loss of a wonderful colleague to a competitor school, and once in a while they’re just amused by a funny bumper sticker they saw on the way to work.  Where the senior colleague adds non-dairy creamer to his java while his youthful colleague steeps her organic hemp tea.  And where you never know where the conversations will go next.  Welcome to the Lounge.  We hope you’ll poke your head in sometimes to see what’s up.

Jensen on Professorial Dress Codes Redux

I have never met Case Western Law Professor Erik Jensen. For all I know, he may be the greatest guy in the world. With that disclaimer out of the way, however, the dude is seriously bugging me. Regular readers of this space will recall that I have had occasion to call out Jensen in the past. Unfortunately, he’s still pushing his proposal for a law faculty dress code, this time in an Inside Higher Ed column that presumably is addressed not just at law professors but at the professoriat as a whole.

Faculty members shall, when on college grounds or on college business, dress in a way that would not embarrass their mothers, unless their mothers are under age 50 and are therefore likely to be immune to embarrassment from scruffy dressing, in which case faculty members shall dress in a way that would not embarrass my mother.

You might think that I - a self-identified reactionary and curmudgeon - would empathize with Jensen’s goals. F-word that. I’m old, tired, and cranky. Life’s too short to go through it being uncomfortable.

Setting the professorial bar low

The next time your law students complain that you or one of your colleagues is just mailing it in, tell them this story about former University of Tennessee law professor and dean John Randolph Neal:

Neal never spent much time on campus — often arriving late, if at all, for class, devoting class time to rambling lectures about current political issues rather than to the course subject matter, and giving all his law students a grade of 95 without reading their exams. The dean also complained about Neal’s “slovenly” dress, which later deteriorated into complete disregard for personal appearance and cleanliness.

I’d be very tempted to hire somebody like Neal, just to make the rest of us look good!

Fiduciary Duties of Officers

Lyman Johnson has posted Having the Fiduciary Duty Talk: Model Advice for Corporate Officers (and Other Senior Agents), a paper that will be very useful to both academics but also, and perhaps especially, practitioners:

Countless legal materials address the fiduciary duties of corporate directors. These include extensive decisional law, numerous institutes and continuing legal education seminars, several treatises and casebooks, and the well-known Corporate Director’s Guidebook, recently released in its fifth edition. By contrast, legal materials on the fiduciary duties of corporate officers - key actors and agents in any company - are quite sparse. Case law is meager and undeveloped, with even such a baseline issue as the applicability of the business judgment rule lacking resolution. Treatises, institutes, and other legal materials frequently lump officer fiduciary duties with those of directors or treat them as an afterthought or, in many instances, overlook the subject altogether. There is no preeminent, standard reference serving as the Corporate Officer’s Guidebook.

This Article seeks to begin rectifying this glaring gap in legal literature and professional practice. Fiduciary duties as a vital component of an effective corporate governance system work on an ex ante basis - i.e., officers must be advised of such duties beforehand if such duties are to influence conduct. This Article describes the sources of legal material for deriving a succinct exposition of officer fiduciary duties and then provides suggested model fiduciary duty advice for lawyers to use in counseling corporate officers and other senior managers.

ABA Stoneridge Panel Comments: Stoneridge and Capital Markets Policy

Stoneridge and Capital Markets Policy
The text on which my remarks will be based:
There is growing concern that American capital markets are becoming less competitive in the global economy.  Indeed, as both the Paulson Committee and the Schumer-Bloomberg reports documented, New York financial markets, stifled by stringent regulations and high litigation risks are in danger of losing business and highly skilled workers to overseas competitors, adversely impacting not only New York, but the entire US economy.
A number of contributing factors are cited by the proponents of this view, such as the Sarbanes-Oxley legislation, the inconsistencies between US GAAP and IFRS, and so on.  The liability exposure created by US securities laws, however, has come under especially close scrutiny.  Indeed, Treasury Secretary Henry Paulson has called securities litigation the “Achilles heel” of the US economy.  Likewise, the Schumer-Bloomberg report argued that “the highly complex and fragmented nature of our legal system has led to a perception that penalties are arbitrary and unfair.”
Despite the active debate, there has been little legislative or regulatory progress in addressing these concerns.  None of the 2008 presidential candidates has prominently emphasized these issues, nor have any senators or Congressman made serious efforts to push a legislative fix.
In Stoneridge vs. Scientific-Atlanta, the Supreme Court stepped into the debate, coming down hard on the side of promoting American competitiveness.  The majority opined:

The practical consequences of an expansion [of the Rule 10b-5 cause of action], which the Court has considered appropriate to examine in circumstances like these, provide a further reason to reject petitioner’s approach. In Blue Chip, the Court noted that extensive discovery and the potential for uncertainty and disruption in a lawsuit allow plaintiffs with weak claims to extort settlements from innocent companies. Adoption of petitioner’s approach would exposea new class of defendants to these risks. As noted in Central Bank, contracting parties might find it necessary to protect against these threats, raising the costs of doing business. Overseas firms with no other exposure to our securities laws could be deterred from doing business here. This, in turn, may raise the cost of being a publicly traded company under our law and shift securities offerings away from domestic capital markets.

This passage elicited harsh criticism from some prominent commentators. Law Professor Jay Brown, for example, took the Stoneridge majority to task for engaging in, as he put it, “Legislation by the Court.” Likewise, Law Professor Larry Ribstein complained that:

the Court seems to have gotten its conclusion from politics rather than jurisprudence.

Focusing on the passage I just quoted, Ribstein continues:

I agree with Elizabeth Nowicki when she says “I will bet you $12 that that line becomes one of the most-quoted Stoneridge lines within the next two years.”

There was a time, not so very long ago, when the Supreme Court quite explicitly took public policy concerns into account in deciding securities cases. Ironically, however, in Central Bank—Stoneridge’s direct antecedent, written by the very same Justice Anthony Kennedy who penned Stoneridge—the Court denied the propriety of doing so:

“Policy considerations cannot override our interpretation of the text and structure of the Act, except to the extent that they may help to show that adherence to the text and structure would lead to a result ‘so bizarre’ that Congress could not have intended it.”

So what are we to make of all this?
In the first place, I would draw a distinction between cases like Stoneridge and another Kennedy opinion; namely, Gustafson v. Alloyd Co. You’ll recall that in that case, which I have elsewhere called “the most poorly-reasoned, blatantly results-driven securities opinion in recent memory,” Justice Kennedy drastically limited the scope of liability under Securities Act Section 12(a)(2).
In the Business Lawyer article to which I just referred, I posited that Gustafson demonstrated that, despite Central Bank, the Supreme Court still relied on policy considerations in deciding securities cases. I continued:

What does appear to have changed are the policy preferences of the Court’s members. The consensus goal once was investor protection through expansive interpretations of the liability provisions. …
[In contrast,] Gustafson is merely the latest of a series of recent cases in which the Supreme Court has proven quite willing to overturn apparently well-settled securities doctrine, even including doctrines assumed by its prior holdings. In particular, the Court has been willing to narrow the scope of securities liability in quite unexpected ways. …
Stated most crudely, the policy preference that seems to run through [Gustafson and these other cases] is the desire to have fewer securities lawsuits. More charitably, this could be rephrased as a desire to prevent excessive, vexatious, often frivolous litigation. As evidence for this conclusion, consider the majority’s references to the “vast” and “extensive” liability that might arise if prospectus was defined broadly.

Note that the same concern motivated Kennedy’s Stoneridge opinion.
Kennedy erred in Gustafson not because policy concerns are always irrelevant, but because Kennedy was dealing with an express statutory cause of action. Kennedy invoked policy concerns in Gustafson to justify a result that was clearly contrary to the statutory language, the legislative history, and years of prior precedents. If there is anything left of neutral principles, one ought to object to decisions, such as Gustafson, which narrow the scope of an express cause of action in ways that are counter to congressional intent. As both dissents argued, that seems to me to be a task more appropriately left to Congress.
In Stoneridge, however, we are dealing with an implied private right of action. We’re dealing with a creature of the judiciary, but of statute.
Public policy considerations weighed heavily in the creation of the implied private rights of action. In J. I. Case v. Borak, for example, in which the Supreme Court created the analogous implied private right of action under Section 14(a)’s proxy rules, the Court expressly relied on the need for private attorneys general, opining that “Private enforcement of the proxy rules provides a necessary supplement to Commission action.”
The Court has repeatedly quoted that passage favorably in cases arising under Rule 10b-5.
Public policy concerns also were repeatedly invoked as the Rule 10b-5 cause of action evolved. This should not be surprising.
In Stoneridge, we are dealing with what I believe is properly understood as a species of federal common law. As Justice Rehnquist famously quipped, Rule 10b-5 is “a judicial oak which has grown from little more than a legislative acorn.” We are dealing here with interstitial lawmaking in which the courts are using common-law adjudicatory methods to flesh out the bare statutory bones.
The analytical methodologies applied by the Supreme Court to federal common-law issues thus provide an appropriate mechanism for giving content to Rule 10b-5. As Judge Winter explained in Chestman, the text of Section 10(b) can be seen as “a general authorization to the SEC and to the courts to fashion rules founded largely on those tribunals’ judgments as to why insider trading is or is not fraudulent, deceptive, or manipulative.” The same holds true for the rest of Rule 10b-5 jurisprudence, in my opinion.
More important folk than I have been of the same opinion. As law Professor Adam Pritchard has written, Justice Lewis Powell “considered the judge-made remedy under Rule 10b-5 to be a species of federal common law, and thus appropriate for judges to consider policy in defining its limits. Second, Powell understood, based on experience counseling corporate clients, the consequences that the phenomenon of class action lawsuits had for corporations and their officers and directors. Finally, Powell was profoundly suspicious of judicially created private causes of action not specifically authorized by Congress. From Powell’s perspective, the expansion of securities fraud lawsuits based on implied rights of action was creating a litigation crisis. That perception of crisis would influence the outcome in a number of cases that came to the Supreme Court.”
Indeed, as Pritchard further observes, Powell thought policy considerations “particularly relevant in ‘a private cause of action . . . wholly of judicial creation.’”
The proper question is not whether Stoneridge is an example of judicial legislation, but rather whether the SCOTUS improperly deployed the tools of common law adjudication so as to reach an erroneous result.
We can debate the merits of trimming securities litigation another day.
Instead, I want to turn to the question of why the Supreme Court so often relies on policy rather than grappling with the nitty gritty of statutory interpretation.
There is general agreement that the Supreme Court has not done a very good job in the securities area, especially in recent years. Scholars operating in a wide range of paradigms have criticized the Court’s recent securities opinions. Supreme Court securities law decisions frequently lack such basics as doctrinal coherence and fidelity to prior opinions.
Why does the Supreme Court not do a better job in securities cases? When deciding securities cases, the Court is faced with hard, dry, and highly technical issues. Supreme Court justices and their clerks arrive on the court with little expertise in securities law. One reasonably assumes that neither the justices nor their clerks have much interest in developing substantial institutional expertise in this area after they arrive. (Former Justice Powell being the exception that proves these rules.) Accordingly, it would be surprising if the Court’s securities opinions exhibited anything remotely resembling expert craftsmanship.
Under such conditions, we would expect the Justices to take securities cases rarely, typically when there is a serious circuit split, which is in fact what we observe. When obliged to take a securities issue, the Court will seek to minimize the amount of effort required to render a decision. This observation is not intended pejoratively. To the contrary, the Justices are acting rationally.
Bounded rationality implies that Supreme Court Justices (and their clerks) have a limited ability to master legal information, including the myriad complexities of doctrine and policy in the host of areas annually presented to the Court. Specialization is a rational response to bounded rationality—the expert in a field makes the most of his limited capacity to absorb and master information by limiting the amount of information that must be processed, by limiting the breadth of the field in which he develops expertise. Supreme Court Justices will therefore need to specialize, just as experts in other fields must do. Specializing in securities law would not be rational. The psychic rewards of being a Justice—present day celebrity and historical fame—are associated principally with decisions on great constitutional issues, not the minutiae of securities regulation.
Technical statutory analysis is hard. Policy is easy. Technical statutory analysis doesn’t get you a write up by Linda Greenhouse. Policy does. Indeed, Greenhouse’s write up of Stoneridge focuses almost exclusively on the policy issue.
What’s the practical implication of all this?
We often tend to approach Supreme Court decisions as an innerantist approaches Holy Writ. We assume that exegesis at a minute level of Supreme Court opinions in this area is both plausible and practical. Hence, we read Supreme Court decisions as though: (i) those decisions were statutes to be interpreted from strict textualist perspective, and (ii) one could ascribe intentionality to the justices’ utterances.
Implicit in this approach to interpreting Supreme Court decisions is the notion that the Court is sufficiently aware of the import of the words it chooses to ascribe meaning thereto. A theory of Supreme Court decisionmaking founded on bounded rationality, by contrast, argues for declining to ascribe intentionality to the Court. Supreme Court decisions in this area should be interpreted narrowly, as reaching only the specific issues before the Court, while dictum should be largely ignored. Put another way, we need to take these cases with a rather large grain of salt.

Lisa Fairfax on Say on Pay

Lisa Fairfax reviews where we stand on say on pay:

According to riskmetrics’ most recent proxy report, by the first half of the 2007 proxy season, some 41 say on pay proposals had gone to vote, averaging about 42% shareholder support, and seven proposals received majority support.  Moreover, as of January of 2008, some 90 proposals have been submitted calling for a say on pay, while at least three companies have agreed to provide an advisory vote on compensation.  Riskmetrics says all of these figures are remarkably high given the relative newness of the issue.  In fact, Riskmetrics compared them to similar figures in the context of majority voting—which, after considerable activism, many agree now has become the norm in most major corporations.  And like majority voting, the say on pay campaign is getting help from legislators.  Indeed, the House passed legislation that would give shareholders an advisory vote on compensation and a similar bill was introduced in the Senate. ...

To be sure, one of the primary criticisms of almost all measures aimed at increasing shareholder power is that such an increase will improperly shift the balance of power, while placing such power in the hands of a small number of shareholders whose interests do not necessarily align with the broader shareholder class.  It is a criticism that has some merit.  However, most people seem to agree, albeit sometimes reluctantly, that the current balance of power has produced undesirable results, particularly with regard to compensation.  So for now, I am willing to wait and see where the say on pay movement takes us.

For a short piece by yours truly opposing legislative say on pay proposals, go here.