November 12, 2003
Bainbridge Gone Berserk!
Posted by Gordon Smith

Any of you who have been following Steve Bainbridge's blawg know that he has been posting at a superhuman pace lately. In fact, he is now posting about how often he is posting! He is updating his blawg 5-10 times daily, which means that he writes faster than I read. In all of the flurry, I didn't want you to miss his recent post opposing the SEC's proposed shareholder nomination rule.

According to Steve,

Just as a good cook eventually stops throwing spaghetti at the wall, it is time for the regulators to stop, take a deep breath, and stop throwing new reforms at Corporate America. Let’s wait and see how the first couple of rounds of reform play out before imposing yet more burdens on corporations in our still precarious economic environment.

Steve is right to oppose the proposed rule, but he has the wrong reason. This is not a problem of the SEC going too far, but rather not going far enough. I hope to share a more complete explanation of my position in a letter to the SEC, but here it is in a nutshell: shareholder voting on board composition is the most important thing that shareholders can do; while we should not allow the shareholder proposal rule to become a vehicle for hostile takeovers, we should enable meaningful ballot access without triggers that evidence managerial dysfunction.

Steve is rightly worried about the costs associated with corporate reform, but this is not the place to draw the line. The SEC should reduce other regulatory burdens, but not stop short of the most important potential corporate governance reform since the adoption of the federal securities laws.

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