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

Good Sense on the SEC Shareholder Access Proposal

Finally, somebody starts making sense:

The SEC in a very unusual move, promulgated two mutually contradictory rules on shareholder voting (one re-affirming the traditional view and one giving major shareholders access to the firm’s board nomination procedure), to see what public comment it would generate.  I doubt either side is correct or, if one side is correct, that it will be correct for very long.  Firms should be able to choose their internal structure (a division of power between shareholders and firms included), publicize it to the markets, and suffer or enjoy the consequences of their choices.  Those firms that choose well will lower their costs of capital and have a competitive advantage.  In other words, the danger is for the SEC to attempt to try and pick a winner in the debate.  The best position for the SEC is an enabling position:  the proxy machinery regulated by the SEC should act in furtherance of whatever state law allows.  Far-sighted states (and/or exchanges) should enable firms to opt into various internal control systems, no one system is mandatory.  Let the investment market, not the political (or academic) market, decide on optimal firm governance procedure.