Free and Fair Elections?

Corporate governance in the United States operates much like the old days of corrupt municipalities: James Michael Curley’s Boston, Richard J. Daley’s Chicago, or George Washington Plunkitt of New York City’s Tammany Hall.  Patronage and abuse of power rule the political culture.  Loyalists are rewarded with favors and perks, ward captains are expected to deliver the vote, the nomination process is rigged, the voting process is suspect, especially when there are more votes than voters.  

We may have come a long way in public life, but not so in corporate America, or on Wall Street.  Fortunately, the current SEC has taken up the cause of good governance, specifically when it comes to nomination and voting at public corporations and certain kinds of investors.   One step in this direction is the SEC’s open meeting next week – it’s called a “Sunshine Act” meeting – that will address questions such as voter anonymity, accurate and honest vote counting, so-called “empty voting” (akin to not being a resident but voting anyway), “over voting” (known in the old days as “vote early and vote often”, where there are more votes than legitimate voters), and the role of proxy advisory firms (akin to ward bosses).

Ted Allen from RiskMetrics offers a brief overview of what to expect from the meeting, as do James McRitchie at, Chris Kentouris at Securities Industry News, and Edith Orenstein at Financial Executives International’s blog.  Last November, McRitchie wrote a detailed analysis of some of the “proxy plumbing” issues likely to be covered at next week’s open meeting, as well as stakeholder positions on related matters.

While the meeting itself is an important development – especially when placed within the broader context of free and fair elections – it’s not exactly a bold call.  The SEC’s language contains more qualifiers than excuses from guilty teenagers: “The Commission will consider whether to issue a concept release to solicit public comment as to whether the Commission should consider revisions to its rules to promote greater efficiency and transparency in the U.S. proxy system and enhance the accuracy and integrity of the shareholder vote”.

The meeting will be webcast — a degree of transparency that would have horrified Curley, Daley, and the denizens of Tammany Hall.  But then, they probably would have disliked Twitter and Facebook, too.

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