CHICAGO – How often do you see capitalists screaming and even going to court to defend the principle that legitimate owners cannot exercise any control over their property? It is not happening in Latin America or in socialist Sweden, but in the United States of America.
The capitalists in question are nothing short of the upper echelon of corporate America: the Business Roundtable, a powerful group composed of the CEOs of major US corporations, which promotes pro-business public policies. The object of their contention is the much-debated “shareholders’ access to proxy” rule, adopted by the Securities and Exchange Commission (SEC) in August to address the fundamental lack of accountability of corporate boards.
In the current system, corporate boards are self-perpetuating entities. To be elected, a board member needs to be nominated by the current board, where executives have considerable influence. As a result, board members owe their loyalty to the managers who directly or indirectly appoint them – and thus have little incentive to dissent, lest they be punished with exclusion.
Even independent directors, often acclaimed as the solution to all problems, are subject to the same pressure. To change this state of affairs, institutional investors must be allowed to propose their own slate of directors. The possibility of being rejected in a real election would naturally make board members accountable to shareholders, indirectly making the executives accountable as well.