Until recently, the dialogue on corporate governance has focused almost exclusively on how to increase the ability of shareholders to impose their will on corporations. Shareholder groups, advisory firms and academics continually developed and added to a set of “best practices” for corporations and their boards of directors, designed to facilitate the ability of shareholders to communicate to corporations what the shareholders wanted and to enforce those dictates if the corporation did not respond. The underlying assumption of this movement was the concept of shareholder primacy. Even the Business Roundtable, in 1997, inexplicably changed from a prior statement of corporate purpose that gave consideration to all stakeholders, to a statement endorsing shareholder primacy: “The Business Roundtable wishes to emphasize that the principal objective of a business enterprise is to generate economic returns to its owners.” Policies such as majority voting, proxy access, elimination of classified boards and rights plans, annual say-on-pay votes, the ability of shareholders to call special meetings and act by majority written consent, and other means for the exercise of shareholder power, were periodically promulgated and largely adopted. Short-termism and attacks by activist hedge funds increased exponentially.

(more…)