On shareholder democracy

If aproved, the newly proposed SEC rules regarding the disclosure of executive pay will make for interesting analyses about the not so direct connection between corporate incentives and results. The Corporate Library Blog, the blog associated with The Corporate Library, brings into attention a piece by NYT's Gretchen Morgenson about shareholder democracy. The idea is that "shareholder elections are procedurally much more akin to the elections held by the Communist Party of North Korea than those held in Western democracies."

In our day and age, we almost instinctively associate (more) democracy with the idea of better in most organizations. Corporations, organizations meant to maximize profit, seem to make no exception.

One can rationalize endlessly about the level of democracy a corporation can and needs to take in. In fact there is a continuum: on the one hand we have the military (pure hierarchy and no democracy), on the other we have the individual. Such continuum makes it difficult, especially for the lawmaker, to rule on the optimum level of corporate democracy. Not to say that, in general, democracies are about legitimacy, not rational decision making...

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