Why Shareholder Democracy Is a Bad Idea

by John Carney for CNBC.com, February 18th, 2011.

The first question anyone should ask about a change to how elections—whether for governments or corporations—are conducted is whether the results will be better government or worse.

The next question is whether the proposal makes the government or board of directors more representative of the preferences of the voters or less.

Many of the proposals to reform elections at the governmental or corporate level fail both these tests. They result in leadership that is less capable and less representative.

At the corporate governance level, the problem is that things like say-on-pay introduce complicated elements into proxy elections. These complexities make it difficult for ordinary shareholders, typically equipped with only a passing interest and knowledge of the issues at hand, to form preferences, much less vote their preferences. (continue reading… )

 

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