Monday, September 18, 2006

Democracy on the March?

In the heading to this site, I refer to “other oxymorons.”

Here’s one of them: “Shareholder Democracy.”

Most companies still operate under plurality voting. This is a delightful system in which 99+ percent of the shareholders can show their hatred for a director by “withholding” their votes (which in Proxyland is the closest they can get to voting against someone), but if one shareholder feels sorry for the guy and votes for him, he's re-elected. Really. Trust me on this. Or trust some law firm.

A recent case, AFSCME vs. AIG, is forcing the SEC to rethink the following question: Can a shareholder force management to include in the proxy (i.e. put to a shareholder vote) proposals to change company by-laws and make the election process more democratic? The SEC looked at its rules and said no, AIG's management didn't have to do that. The court disagreed, basing its decision on the SEC's past interpretations of its own rules. Which left the SEC free to re-interpret them.

This is quite a big deal, really. If shareholders get the power to change how directors are elected, the concept of shareholder democracy might become less oxymoronic. Who knows, this could improve corporate governance enough to put this blog out of business. (Uh, "business" should be in quotes there.)

The SEC will consider its options at an open meeting on October 18, which happens to be the birthday of one Jesse Helms, known for engaging in some rather creative election practices of his own.

No comments: