You are right, more democracy is needed. Unfortunately, neither SEC proposal delivers.

Kara Scannell in the Wall Street Journal (Cox Splits Vote on Proxy Access, 7/26/07) and many others refer to the SEC's Republican backed "nonaccess proposal" as the "status quo." However, it isn't. Under the status quo, any shareowner who has held $2,000 worth of shares in a company for a year can introduce a binding or nonbinding resolution on proxy access.

The actual status quo is the same as pre 1990, before the SEC changed its interpretation without amending the rule through the required public comment process. In 1981, for example, Union Oil had to include a proposal permitting 500 or more shareholders to place nominees on the corporate ballot, with no threshold on the number of shares held individually or collectively. Just as shareowner proposals looked like they would begin to win majority votes, the SEC issued a series of no-action letters in 1990 ruling that proposals concerning board nominations could be excluded.

That's what AFSCME v. AIG was all about. The SEC can't reinterpret its rules without going through the rulemaking process and allowing an opportunity for public comment. Under the status quo, three such resolutions were submitted this year. Two got less than a majority vote; one got more. Special interest groups didn't hijack any companies. The sky did not fall.

We had many years of experience pre-1990 and now one proxy season post-AFSCME v. AIG. Let's not go back to an era where shareowners were stripped of their rights.

I urge Messrs. Bissonette and McRitchie to reflect on James Madison's definition of 'faction' in Federalist #10. Specifically, I think that the unintended consequence of what they advocate is to unleash the effects of either a majority faction (tyranny of the majority) or a minority faction (power plays by special interest groups [read hedge funds, private equity funds]). For example, President Bush who bandies around "democracy" as if it were his mission from God, has unleashed the majority faction of Hamas in Palestine and the minority factions of sectarian impasse in Iraq (Newsweek's Fareed Zakaria calls this an 'illiberal' democracy). Thus from Madison's definition, there is not one but rather three forms of democracy [and conceptions of political discourse]: (1) direct democracy [popular will]; (2) delegative democracy [power plays/bargaining]; and (3) deliberative democracy [reason].

Note that Delaware's corporate republican tradition is along the lines of a deliberative democracy (e.g., special committees of disinterested independent directors; enhanced scrutiny by the Delaware courts for poison pills). Moreover, fair corporate suffrage has been greatly enhanced the negative majority power of dismissal (i.e., the majority voting standard). Given the public interest objective of what Madison in Federalist #57 termed the pursuit of the "common good" (i.e., the pursuit of the interest of the shareholders-at-large)--and the possible unintended consequences of the "effects of 'faction'" which has destroyed republics throughout history--why is it so important for shareholders to have the positive majority power of appointment? Isn't Professor Grundfest's "advise-and-consent" approach good enough where shareholders have veto power? Should directors have campaign platforms? Should we demand that they be mere “tools” that carry out the will of the shareholders? Can they be reasonable—meaning open minded or willing to be persuaded? Would Mr. McRitche threaten retribution if they changed their minds (flip-flopped) once elected (given perhaps a better understanding of the internal politics of the corporation)? Don't we want directors to be disinterested from ALL influences--whether from management or their sponsoring shareholder interest group? Rather than delegates for their sponsoring shareholder interest group, don't we want them to be trustees or Burkean representatives who deliberate to pursue the common good (i.e., the interests of the shareholders-at-large)? From Madison’s Federalist #57, how do we institutionally create these trustees for the common good? I believe that is what is at stake with the SEC's decision.

Without being ideological or dogmatic, what exactly is broken with the U.S. proxy system? Exactly what concrete *problem* (besides activists complaining about the abstract concept of “fair corporate suffrage”) is the SEC trying to solve? Why aren’t the majority voting standard, Grundfest's "advise and consent" and the fiduciary duty of good faith good enough? Like President Bush, are all these activists on a God-sent mission where they have no clue on what our Founding Fathers meant by “democracy”--and the unintended consequences of the effects of “faction?”

"If we don't know the ideals, the reasons that [our Founding Fathers] in their time cared so much about achieving what they did -- that's not just regrettable, it's dangerous. We have to understand how all these benefits, this way of life that we have prosper by, and are so favored by, came to be."
-- Historian David McCullough (CNN, July 4, 2001)