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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Comments (2)

1. Posted by R Groeber on November 13, 2003 @ 3:52 | Permalink

I am eager to read the promised elaborations. I am following Bainbridge's and your post as well as others. I recently started a blog, but find that I myself am overwhelmed with reading the new developments. Perhaps, the problem is too much quantity of reform and not enough quality.

2. Posted by Prof. Bainbridge on November 16, 2003 @ 7:40 | Permalink

Hey Gordon. I've got a VERY long explanation of my position on the SEC rule over at my blog - -- Your post prompted me to pull together a bunch of arguments. I'm looking forward to seeing your more elaborate explanation, which I hope you'll post. Steve

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