Prof. Ribstein has a thoughtful post on what he calls the "shareholder democracy sham" and how those efforts interface with the "battle for control" (my words) between states like Delaware and the SEC (as well as the federal courts) over corporate governance issues. Here is the link: Ideoblog: The "shareholder democracy" scam. Here is a excerpt from his post:
Despite all the complaints about state law, there is scant evidence that federal control of corporate governance would be any better. Delaware must compete actively and continue to innovate to maintain its dominance against all the other states. Within that system firms themselves can experiment, as they have, for example, with majority voting for directors. The reformers would replace that system with a one-size-fits-all federal system in which interest groups, particularly including unions, contend and corporate policy shifts with the political winds.
For those who think uniformity when they see federal, consider how, in the AFSCME decision, one federal court has thrown the SEC’s shareholder proposal rule into chaos while the political forces line up in Washington.
This sort of thing doesn’t happen in Delaware. The second principle is about who controls our modern corporations. The reformers like to shout about "shareholder democracy" as if it meant anything. But the question is which shareholders. It’s no accident that the AFSCME case was brought by a union. Corporate elections are unions’ last opportunity to shore up their declining clout. Unions already have secured an extensive executive compensation disclosure rule to whip up populist resentment about executive pay. The next step is to create a mechanism to bring that resentment to bear in corporate elections. It should be obvious to anybody who cares to look past the rhetoric that the unions are seeking bargaining leverage on behalf of their members, and to ensure their own survival. They are not seeking to represent the interests of investors generally. Their ideal is the sclerotic European firm, with its labor representatives on the board.
None of this is to say that current corporate governance is perfect and that there are no agency costs. More shareholder power is indeed an answer to unresponsive entrenched managers. But there are viable alternatives to union dominance, including hedge funds and private equity. We don’t see reformers, unions (or for that matter incumbent managers) lining up to defend these shareholders because they might actually want to make more money for the rest of us. Instead we see calls for more federal regulation of these shareholders.
So peek behind the "shareholder democracy" rhetoric and we see what Levitt and the rest of his "reformer" mob have on their minds: federal control of corporate law, turning corporate governance into a political battle between unions and managers, and a rich market for consultants on "good governance."