Shareholders with at least a 1 percent stake in the company would be able to nominate candidates to run opposite those chosen by the board or management. Most importantly, all nominees will appear on the same ballot. Currently, shareholders have the right to circulate their own list of nominees, but must pay for separate ballots and elections, often an expensive process. By combining all nominees under a single ballot, the SEC proposal would ease such a burden. 

 

Similar ideas have been promoted and ultimately shot down for years. Critics argue that shareholders are too focused on short-term profits, and thus unable to effectively promote long-term business models. Others cringe at the thought of special interest groups infiltrating board meetings, lobbying against the general good and bringing about dysfunction. Lowenstein acknowledges that some concerns have merit, but points to details in the SEC proposal that would mitigate any negative consequences. Nominations will only be accepted from shareholders who are not seeking majority control and are capped at a quarter of the board seats. He argues that these limitations allow shareholders to have greater representation, but not enough power to radically alter board dynamics without consent.

 

For Lowenstein, these simple changes would allow management and shareholders to become less detached from one another’s realities. Shareholders could voice their concerns, while understanding the limitations of management. Furthermore, increased oversight would help reduce the kind of poor management performance that heavily contributed to our current economic downturn.   

- Adrine Akopyan

 

A Seat at the Table (by Roger Lowenstein, New York Times)