Harvard's Corporate Governance blog has a transcript of a speech given by SEC Commissioner Troy Paredes on shareholder access:
As a practical matter, public company shareholders are not well-positioned to run the enterprises in which they invest. Managerial responsibility over a firm’s corporate strategy and day-to-day business and affairs instead is in the charge of directors and management. That said, shareholders retain the right to vote on fundamental corporate changes, such as a merger, a sale of all or substantially all of the corporation’s assets, and an amendment to the corporate charter or bylaws. Most notably, shareholders vote for board members. Shareholders also have the right of “exit,” as they can sell their shares if they disapprove of the company’s performance.
Precisely right. I made these same arguments, albeit in much greater detail in my article The Case for Limited Shareholder Voting Rights.
The animating question behind any discussion of shareholder rights thus presents itself: What is the proper institutional arrangement for ensuring that the company is managed in the best interests of shareholders when those who own the firm do not actively run it?
Easy. Director primacy.
Paredes goes on to explain clearly and concisely why the SEC's mandatory approach is less attractive than the enabling approach of state law. It is a must read for anyone interested in this area.
