Restoring American Financial Stability Act of 2010: Corporate Governance Provisions

by J. Robert Brown, for The Race to the Bottom, March 16, 2010.

We take a temporary breather from our discussion of Kurz v. Holbrook.  The discussion will resume tomorrow.

Instead, we turn to Senator Dodd‘s leviathan bill on financial reform.  We take a moment to briefly discuss the corporate governance provisions included in the Bill (the text is below).  They include access (which the SEC almost certainly has the authority to do without the legislation), a provision that requires companies to explain why they have or have not separate the chairman and the CEO positions (the SEC has already done this, more or less), and a requirement for listed companies that directors be elected by majority vote in uncontested elections.

The latter is a disappointment.  These provisions have become common enough, particularly among exchange traded companies.  But the legislation would merely require directors not receiving a majority to resign.  The board would then have the discretion to reject or accept the letter.  As RiskMetrics has noted, somewhere around 100 directors in 2009 did not receive a majority vote and none of them lost their position because of this failure…(continue reading)

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