Corporate Governance

Access and Its Opponents: The Ostensible Improvement in Corporate Governance

By J. Robert Brown

One of the much repeated arguments against access has been that corporate governance has so improved over the last few years (since SOX), that this additional right is not needed.  The letters usually refer to the same developments:  The adoption of majority vote provisions (which we address in a separate post), the increase in the number of independent directors on the board, and the use of independent chairmen/lead directors.

We will address this issue in much greater terms when we put up some posts on an ABA Report on Governance.  Suffice it to say that there is not much credit to be given for these reforms.  The existence of more independent directors (again, something likely limited to the largest companies) while at the same time allowing the CEO to remain chair of the board (collapsing lead director and independent chair stats masks the fact that almost no large companies rely on the latter model) simply facilitates CEO control and capture of the board (the chair largely controls the information flow to these directors and is far less likely to circulate materials critical of his/her performance).  We have likewise noted over and over that "independent" directors are not, in many cases, actually independent. 

Maybe a much stricter definition of independence coupled with an independent chair of the board would make access far less urgent.  In those circumstances, the board might well be in a position to look out for shareholder interests.  But that is not the system that is currently in place and until it is, access is an imperative. 

For the complete letter filed by this Blog with the SEC on the access proposal, go here.  For a history of access, go here.

Full post as published by The Race to the Bottom on August 28, 2009 (boomark / email).