The New York Times on the Shareholder Rights Project

The New York Times published on Sunday an article on the work of the Shareholder Rights Project (SRP). The article, entitled New Momentum for Change in Corporate Board Elections, was written by New York Times columnist Gretchen Morgenson.

Based on a review of the SRP’s results and interviews with the SRP’s clients and the Director of the SRP, the article discusses the benefits produced by the SRP’s work. The article begins with the observation that “shareholder efforts that actually succeed in changing dubious corporate governance policies are so rare that when they happen, it makes you sit up and take notice;” and concludes that “[c]learly, the shareholder project is having a positive effect.” The article expresses the hope that “mutual funds would join this bandwagon or construct their own,” and suggests that “[t]he Shareholder Rights Project is a model they might want to emulate.”

The SRP is a clinical program operating at Harvard Law School. The SRP works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance.

The New York Times article stresses that the work of the SRP and its clients during the 2012 and 2013 proxy seasons has produced a large number of board declassifications at large publicly traded firms, moving these companies to annual elections for directors. The article further notes that “[a] far better approach for holding directors accountable, according to a significant body of academic research, is to make them stand for election annually.”

The article quotes two senior officers of public pension funds who commented on their work with the SRP. William R. Atwood, Executive Director of the Illinois State Board of Investment (ISBI), told the New York Times that “joining forces with the Shareholder Rights Project was crucial to [ISBI] getting results,” and that ISBI does not “have bandwidth to go out and pursue this kind of thing on our own.”

Michael P. McCauley, Senior Officer for Investment Programs and Governance at the Florida State Board of Administration (SBA), told the New York Times that “[i]n the beginning there was a lot of uncertainty about how this was going to be received, how effective it would be.” “But,” Mr. McCauley added, “it produced results immediately,” and the Florida SBA achieved “a larger footprint than we would if we were doing it alone.”

The New York Times columnist also interviewed the Director of the SRP, Lucian Bebchuk. Professor Bebchuk commented that “[m]any companies fail to adopt governance reforms that are broadly supported by shareholders because investors do not take the initiative to bring about such changes,” and explained that the work of the SRP has enabled the preferences of the SRP’s clients, preferences that are also shared by most other institutional investors, to be better reflected in the governance arrangements of many companies.

The New York Times article is available here. Prior Forum posts about the SRP are available here. The Forum expects to publish in the near future the SRP’s overview of the results produced by its work during the first half of 2013.

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