When the Chamber of Commerce is not busy calling for the “Scopes monkey trial of the 21st century” in an attempt to publicly put climate science on trial, it is spending its time trying to scuttle an attempt by the Securities and Exchange Commission (SEC) to increase corporate accountability.
The SEC has proposed implementing what is known as “proxy access,” which would make it easier for shareholders to replace a company’s board of directors. Right now, during a corporate election, a company sends out a “proxy” (ballot) with its preferred slate of candidates, while “dissenting shareholders [must] pay up for mailing and publicity costs, sometimes in the millions of dollars,” to send out their own, separate ballot.
The SEC wants to mandate that shareholders who hold 1 to 5 percent of a company’s shares (depending on the company’s size) for more than one year be allowed to put their candidates on the main ballot. But as the Wall Street Journal reported “the largest U.S. businesses, law firms and business groups have stepped up their challenge” to the SEC’s proposal:
In a last-minute bid to derail or weaken the measure, opposing groups have dispatched both Washington lobbyists and grass-roots letter-writers…The U.S. Chamber of Commerce, the nation’s largest business lobby, is engaging in an all-out lobbying effort with lawmakers that it plans to ramp up after Labor Day.
Currently, only five of the 4,000 public companies that the data service FactSet SharkWatch tracks allow proxy access.
With its opposition, the Chamber is showing its contempt for shareholders who want to hold managers accountable for their actions. As Harvard law professor Lucian Bebchuk wrote, “the objections to the SEC proposal are weak“:
The case for comprehensive reform of corporate elections is supported by a significant body of empirical evidence. Arrangements that insulate directors from removal are associated with lower firm value and worse performance. The proxy rules have been intended by Congress, the courts have stated, “to give true vitality to the concept of corporate democracy.” Adopting the SEC proposal, and the additional reforms I discussed, would advance this important goal.
Even if this proposal were enacted, it wouldn’t cure all that is wrong with American corporate governance, but it would be a step in the right direction. The Chamber, though, prefers a status quo in which corporate boards remain unaccountable to the very people who own the company.