Corporate Governance

The Case for Access: The British Experience

By J. Robert Brown

Those who allege that access will cause substantial disruption in the corporate governance process have a serious weakness:  the facts.

Access has been in place in Great Britain for years with no apparent harm.  Indeed, we note that in a letter submitted by the Association of British Insurers, Peter Montagnon, Director of Investment Affairs, had this to say:

• Experiences in the UK and other markets have shown that the ability to nominate directors does not lead to frivolous nominations. Indeed, a lack of access to the proxy and an inability to vote in a meaningful way (i.e. majority voting) on directors' elections, may have encouraged shareholder requisitioned resolutions on corporate affairs, which are significantly more prevalent in the US than other markets. In our experience, an ability to nominate and majority-vote on directors has created an environment of engagement and consultation between boards and investors, not confrontation through the proxy ballot. However, we do support sensible ownership thresholds to prevent the possibility of frivolous nominations. The current thresholds therefore proposed are in our view set at reasonable levels.

In short, those alleging that the practice will disrupt carry the burden of demonstrating why practices in Great Britain will not be replicated here.  It is a burden they have not yet met.

Full post as published by The Race to the Bottom on September 12, 2009 (boomark / email).