We’re on the record as being fans of decentralized rules for corporate governance. Although lots of people seem to think that a national, uniform set of rules would make the markets more efficient, we’re skeptical that any one set of rules would (a) get the formula for corporate governance right and (b) really be the best fit for the many different capital requirements of American corporations. So we were glad to see Larry Ribstein take on the essay in today’s Wall Street calling for the SEC to establish uniform rules for the election of directors.
As for the Millstein/Goldschmid/Morgenson argument that director elections without shareholder nominations are Soviet-style – this is backwards. American corporate governance is fundamentally ruled by the capital markets, which discount information into stock prices and give firms and their managers incentives to respond to market demand. “Soviet-style” is when this process is circumvented by one-size-fits-all federal rules or, possibly even worse, by the chaotic system that exists in the absence of SEC clarification.
The federal role in corporate governance [Ideoblog]