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E-MailThis post is from John F. Olson of Gibson, Dunn & Crutcher LLP.
I’ve been giving some thought to the dust up last year between Marty Lipton and other governance experts as to whether Pfizer’s initiative of having several of its independent directors meet with its largest institutional investors represented a landmark in the decline of director-centric corporate governance, and have also been thinking about what we mean when we talk about director-centric vs. shareholder-centric governance. The working text of a talk I gave on the subject last week at the Corporate Governance Center at the University of Tennessee in Knoxville, at the invitation of Joe Carcello and Joan Heminway, is available here. I plan to do some more work on this and turn it into an article later this year. In the meantime, I’d greatly appreciate comments.
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I offer some suggestions over at my blog in Shareholder- versus Director-Centric Governance
In my view, neither Shareholder-centric nor Director-centric corporate governance is desired for publicly traded corporations. Instead, corporate charters need to adopt carefully nuanced division of powers with checks and balances as exists in the US constitution and as explicated in a number of my SSRN papers such as ‘Corporate Charters with Competitive Advantages’ at http://ssrn.com/abstract=10570 and ‘A New Way to Govern: Organisations and society after Enron’ at http://ssrn.com/abstract_id=319867.
In addition, directors require creditable sources of information, independent of management, to carry out their most basic duties to monitor and direct both management and the business with due care and diligence. US, UK and other Anglophone corporations have no systemic processes to achieve this objective such as can be found in Japan and Europe. It was for this reason that Michael Porter recommended in his 1992 report “Capital Choices” on competitiveness that US firms engage with all their critical stakeholders to obtain feed forward and feedback information independently of management.
While I disagree with Olson’s opposition to proxy access, we do find common ground in endorsing Gary Lutin’s efforts re shareholder forums. See http://www.shareholderforum.com
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[…] Olson’s post, Shareholder-Centric vs. Director-Centric Corporate Governance, to the Harvard Law Corporate Governance Blog, adds to the ongoing debate as to the balance of […]