Comment Letter of Eighty Professors of Law, Business, Economics, or Finance in Favor of Facilitating Shareholder Director Nominations

I submitted to the SEC yesterday a comment letter on behalf of a bi-partisan group of eighty professors of law, business, economics, or finance in favor of facilitating shareholder director nominations. The submitting professors are affiliated with forty-seven universities around the United States, and they differ in their view on many corporate governance matters. However, they all support the SEC’s “proxy access” proposals to remove impediments to shareholders’ ability to nominate directors and to place proposals regarding nomination and election procedures on the corporate ballot. The submitting professors urge the SEC to adopt a final rule based on the SEC’s current proposals, and to do so without adopting modifications that could dilute the value of the rule to public investors.

A copy of the comment letter filed with the SEC is available here. Below is the text of the main part of the comment letter followed by the list of the eighty professors.

TEXT OF MAIN PART OF COMMENT LETTER:

This comment letter is submitted on behalf of a bi-partisan group of eighty professors of law, business, economics, or finance whose names appear below (the “Submitting Professors”). The Submitting Professors are affiliated with forty-seven universities around the United States. All of the Submitting Professors have research or professional interests relating to how publicly traded firms are run and how their affairs are governed by corporate and securities laws. The Submitting Professors welcome the opportunity to provide comments to the Securities and Exchange Commission (the “SEC”) on its proposed rule Facilitating Shareholder Director Nominations (the “Proposed Rule”).

There is substantial variance among the views of the Submitting Professors on many corporate governance matters. However, all of the Submitting Professors support the SEC’s proposals to remove impediments to the exercise of shareholders’ rights to nominate and elect directors and to enable shareholders to place proposals regarding nomination and election procedures on the corporate ballot. All of the Submitting Professors urge the SEC to adopt a final rule based on the SEC’s current proposals, and to do so without adopting modifications that could dilute the value of the rule to public investors. While all of the Submitting Professors share the views expressed in this paragraph, each individual professor may not endorse each and every statement below.

The ability of shareholders to replace directors is supposed to play a key role in the governance structure of public companies. However, shareholders seeking to replace directors face considerable impediments. One significant impediment to replacing directors is incumbents’ control of the company’s proxy card – the corporate ballot sent by the company at its expense to all shareholders. We believe that providing shareholders with rights to place director candidates on the company’s proxy card, as the SEC proposes doing, would improve director accountability.

Providing shareholders with minimum rights of access to the company’s proxy card, and allowing companies to provide shareholders with additional rights but not to take away the set minimum, is consistent with the long-standing and established role of the proxy rules (and the securities laws in general) and the division of labor between them and state corporate law. The proxy rules (and the securities laws in general) have long provided mandatory arrangements establishing a minimum level of protection for public investors, with companies being free to add additional protections but not to reduce investors’ protections below the established minimum.

We also believe that incumbent directors should not have an effective monopoly power to set the corporate arrangements governing their own election, and that it is therefore desirable to facilitate shareholders’ ability to amend – within the limits set by state and federal law – corporate arrangements governing the nomination and election of directors. Accordingly, we support the SEC’s proposal to amend Rule 14a-11 to enable shareholders to place proposals related to such arrangements on the corporate ballot.

In designing the final rule, the SEC should be careful to avoid eligibility or procedural requirements that would undermine or unnecessarily detract from the Proposed Rule’s value for investors. In evaluating these requirements, it is important to keep in mind that, no matter how moderate eligibility or procedural requirements may be, shareholder nominees must still meet the demanding test of getting elected before they can join the board. A shareholder nominee will join the board only if the nominee obtains more votes than the incumbents’ candidate in an election in which incumbents, but not the shareholder nominee or the nominator, may spend significant amounts of the company’s resources on campaign expenses.

In evaluating eligibility and procedural requirements, the SEC should also keep in mind that many institutional investors lack incentives to invest actively in seeking governance benefits that would be shared by their fellow shareholders. Accordingly, the final design of the rule should avoid imposing any unnecessary hurdles or costs on shareholders organizing or joining a nominating group.

The SEC was authorized by Congress to prescribe rules to regulate the use of proxies “as necessary or appropriate in the public interest or for the protection of investors.” Adopting the SEC’s proposals, while ensuring that the final rule does not impose eligibility or procedural requirements that would dilute its value for investors, will advance the public interest and the protection of investors.

LIST OF THE EIGHTY SUBMITTING PROFESSORS:

Michael Adler
Professor of Finance & Economics
Columbia University Business School

Robert Ashford
Professor of Law
Syracuse University College of Law

Steven Balsam
Professor of Accounting
Fox School of Business and Management
Temple University

Lucian A. Bebchuk
William J. Friedman and Alicia Townsend
Friedman Professor of Law,
Economics, and Finance
Director of the Program on Corporate Governance
Harvard Law School

Lisa Bernstein
Wilson Dickenson Professor of Law
The University of Chicago

Sanjai Bhagat
Professor of Finance
Director, Leeds Ph.D. Program
Founding Director, Burridge Center for Valuation
Leeds School of Business
University of Colorado

Leonard Bierman
Professor
Mays Business School
Texas A&M University

Bernard S. Black
Professor of Law
The University of Texas Law School

Michael Bradley
F.M. Kirby Professor of Investment Banking
Fuqua School of Business
Professor of Law
Duke University

J. Robert Brown, Jr.
Professor
University of Denver Sturm College of Law

Lawrence D. Brown
J. Mack Robinson Distinguished Professor
of Accountancy
Georgia State University School of Accountancy

Richard Buxbaum
J.D. Program and Jackson H. Ralston Professor
of International Law
Boalt Hall
University of California at Berkeley

David C. Cicero
Assistant Professor of Finance
Lerner College of Business and Economics University of Delaware

Jim Cox
Brainerd Currie Professor of Law
Duke Law School

Martijn Cremers
Associate Professor of Finance
Yale School of Management

Lawrence A. Cunningham
Henry St. George Tucker III Research Professor
George Washington University

Lynne L. Dallas
Professor of Law
University of San Diego School of Law

Steven M. Davidoff
Associate Professor of Law
University of Connecticut School of Law

George W. Dent
Schott-van den Eynden Professor
Case Western Reserve University School of Law

B. Espen Eckbo
Tuck Centennial Chair in Finance
Founder, Lindenauer Center for
Corporate Governance
Tuck School of Business
Dartmouth College

Aaron Edlin
Richard Jennings Professor of Law and Professor of Economics
University of California at Berkeley

Franklin R. Edwards
Arthur F. Burns Professor of Free and
Competitive Enterprise
Columbia Business School

Lisa M. Fairfax
Leroy Sorenson Merrifield Research
Professor of Law
The George Washington University Law School

Olubunmi Faleye
Associate Professor of Finance
Lloyd Mullin Research Fellow
Northeastern University

James Fanto
Professor of Law
Brooklyn Law School

Fabrizio Ferri
Assistant Professor
Harvard Business School

Jill E. Fisch
Perry Golkin Professor of Law
University of Pennsylvania Law School

Tamar Frankel
Professor of Law
Michaels Faculty Research Scholar
Boston University Law School

Jesse Fried
Professor of Law
Harvard Law School

Nicholas L. Georgakopoulos
H.R. Woodard Professor of Law
Indiana University School of Law – Indianapolis

Ronald J. Gilson
Meyers Professor of Law and Business
Stanford Law School

Henry Hansmann
Augustus E. Lines Professor of Law
Yale Law School

Jay C. Hartzell
Associate Professor of Finance
Allied Bancshares Centennial Fellow
McCombs School of Business
The University of Texas at Austin

Claire Hill
Professor and Solly Robins Distinguished
Research Fellow
University of Minnesota Law School

Michael C. Jensen
Jesse Isidor Straus Professor of Business Administration Emeritus
Harvard Business School

Kose John
Charles William Gerstenberg Professor of
Banking and Finance
Leonard M. Stern School of Business
New York University

Ehud Kamar
Professor of Law
Gould School of Law
University of Southern California

Naveen Khanna
AJ Pasant Endowed Chair Professor of Finance
Broad College of Business
Michigan State University

Vikramaditya S. Khanna
Professor of Law
University of Michigan Law School

Bruce Kogut
Sanford C. Bernstein & Co. Professor of Leadership and Ethics
Columbia Business School

Jonathan GS Koppell
Associate Professor of Politics and Management
Yale School of Management

Donald C. Langevoort
Thomas Aquinas Reynolds Professor of Law
Georgetown University Law Center

Michael E. Levine
Distinguished Research Scholar
Senior Lecturer
New York University School of Law

Ross Levine
James and Merryl Tisch Professor of Economics
Director, William R. Rhodes Center for International Economics and Finance
Brown University

Karl V. Lins
R. Thayne Robson Faculty Fellow
Professor of Finance
David Eccles School of Business
University of Utah

Katherine Litvak
Professor of Law
Northwestern University School of Law

Dennis E. Logue
Steven Roth Professor Emeritus
Tuck School
Dartmouth College

Stephen Marks
Professor of Law
Boston University School of Law

Ronald W. Masulis
Frank K. Houston Professor of Finance
Professor of Law
Vanderbilt University

Todd Milbourn
Professor of Finance
Finance Area Coordinator
Olin Business School
Washington University

Dale Oesterle
J. Gilbert Reese Chair in Contract Law
Moritz School of Law
Ohio State University

Richard W. Painter
S. Walter Richey Professor of Corporate Law
University of Minnesota Law School

Arthur R. Pinto
Professor of Law
Co-Director Dennis J. Block Center for the Study of International Business Law
Brooklyn Law School

Katharina Pistor
Michael I. Sovern Professor of Law
Columbia Law School

Robert A. Ragazzo
University of Houston Law
Foundation Professor of Law
University of Houston Law Center

Jay R. Ritter
Cordell Professor of Finance
University of Florida

Len Rosenthal
Professor of Finance
Bentley University

Ronald D. Rotunda
Doy and Dee Henley Chair and Distinguished Professor of Jurisprudence
Chapman University School of Law

Malcolm S. Salter
James J. Hill Professor, Emeritus
Harvard University
Graduate School of Business Administration

Antoinette Schoar
Michael Koerner ’49 Professor of
Entrepreneurial Finance
MIT Sloan School of Management

Kenneth Scott
Ralph M. Parsons Professor of
Law and Business, Emeritus
Stanford Law School

Robert J. Shiller
Arthur M. Okun Professor of Economics
Yale University

Stanley Siegel
Professor of Law
New York University School of Law

D. Gordon Smith
Associate Dean for Faculty and Curriculum
Glen L. Farr Professor of Law
J. Reuben Clark Law School
Brigham Young University

Jeffrey Sonnenfeld
Lester Crown Professor of Management Practice Yale School of Management

Marc I. Steinberg
Senior Associate Dean for Research
Rupert and Lillian Radford Professor of Law
SMU Dedman School of Law

Shyam Sunder
James L. Frank Professor of Accounting,
Economics and Finance
Yale School of Management

Eric Talley
Professor of Law
Faculty Co-Director, Berkeley Center for Law, Business and the Economy
Boalt Hall
University of California at Berkeley

Anjan Thakor
John E. Simon Professor of Finance
Senior Associate Dean-Programs
Olin School of Business
Washington University

Samuel C. Thompson, Jr.
Professor of Law
Arthur Weiss Distinguished Faculty Scholar
Director, Center for the Study of
Mergers and Acquisitions
Dickinson School of Law
The Pennsylvania State University

Belén Villalonga
Associate Professor
Harvard Business School

William K.S. Wang
Professor of Law
University of California, Hastings

Mark Weinstein
Associate Professor of Finance and
Business Economics
Marshall School of Business
Associate Professor of Business and Law
Gould School of Law
University of Southern California

Michael S. Weisbach
Professor and Ralph W. Kurtz Chair in Finance
The Ohio State University

Elliott J. Weiss
Charles E. Ares Professor of Law Emeritus
University of Arizona

Ivo Welch
CV Starr Professor of Economics (Finance)
Brown University

Lawrence J. White
Professor of Economics
Stern School of Business
New York University

Charles K. Whitehead
Associate Professor of Law
Cornell University Law School

Luigi Zingales
Robert C. McCormack Professor of
Entrepreneurship and Finance
Booth School of Business
The University of Chicago

Eric Zitzewitz
Associate Professor of Economics
Dartmouth College