Why Shareholders Don’t Want Shareholder Democracy

by John Carney for CNBC, March 17th, 2011.

Have you ever noticed how few public companies are run on anything like a democratic basis?

They have some of the trappings of democracy. Elections for directors; ballots on important—and sometimes unimportant—questions of corporate governance or strategy; investor meetings that sometimes resemble a New England townhall.

But, in practice, their democracy is a lot like the democracy in a one party state—you get the vote, but only party candidates and platforms stand any chance of winning.

To some advocates of good corporate governance, this is a scandal. It almost looks like there’s a bit of authoritarianism lurking at the heart of the free-market. If democratic capitalism is good enough to run our country, why isn’t it good enough to run our corporations?

In reality, however, corporate governance gives far more respect to individual liberty than any political democracy does. Unlike being a US citizen and a resident, it is quite easy to withdraw your membership from a corporation—simply sell your shares. No corporation can force you to accept its strategy or leadership. If you don’t like it, you don’t have to be a shareholder. (continue reading… )


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