Guest Contributor: Proxy Access Could Hurt the Bottom Line
GUEST CONTRIBUTOR POST: Brian G. Cartwright is senior advisor to Latham & Watkins LLP and a fellow of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University. Charles M. Nathan is a member of the corporate department in Latham & Watkins’ New York office, is co-chair of the firm’s Corporate Governance Task Force and is former global co-chair of the firm’s Mergers and Acquisitions Group. This post is exclusive to The Conference Board Governance Center.
By Brian G. Cartwright and Charles M. Nathan
The SEC’s adoption of proxy access on Aug. 25 is a watershed event of potentially historic significance, climaxing over four decades of activist effort aimed at the boardroom.
The legendary community organizer Saul Alinsky invented what he dubbed the “proxy tactic” during his late-1960s-era agitations against Eastman Kodak in Rochester, N.Y. As Alinsky wrote in his famous 1971 guide Rules for Radicals, before then “[n]o one had ever organized a campaign to use proxies for social and political purposes.” But as Alinsky thought about the idea, “[s]oon I was intoxicated by the possibilities. You could begin to play the whole Wall Street board up and down.” While Alinsky realized that “corporations will fight back by pointing out that the … demands of the stockholders will result in diminished dividends,” he believed enough stockholders would find their campaigns “more important than a cut in dividends.” Alinsky was so excited by his new idea, that he trumpeted the proxy tactic as “one of the single most important breakthroughs in the revolutions of our times.”
Well, now we shall see whether Alinsky was right. At a moment when our economy is tottering, millions are unemployed with little hope of relief, and American economic dominance is challenged by aggressive new competitors in Asia, a bare party-line majority of the SEC has embarked on a grand experiment in politicizing the leadership of our businesses. Read the rest of this entry »
