This morning’s mail has upset a part of my world view.
Universities long have been accused of being bastions of populist, liberal thought; Northeastern elite universities (along with anomalous Berkeley, the Harvard of the West) have borne the brunt of this accusation.
Such was not my experience at Harvard Law School; during my attendance (decades ago) it was the bastion of pro-corporate thinking. Corporations should be minimally regulated so as to return greatest profit to their sole relevant constituency: the shareholders.
My 7:44 AM email today from The Harvard Law School Shareholder Rights Project reports that that group, “a clinical program through which Harvard Law School faculty, staff and students assist public pension funds and charitable organizations to improve corporate governance at publicly traded companies in which they are shareowners,” has been working all year to force public companies to de-stagger their boards.
They have submitted proposals to over 80 of the S&P 500, and 42 (one third of the S&P 500 with staggered boards) have agreed to move to annual elections of the entire board. The list includes Alcoa, BlackRock, Cigna, Lilly, McDonald’s and PPG.
Several aspects are fascinating. Leave it to Harvard to apply some of its student outrage in the support of retirement funds who have invested in public companies; not exactly the poor huddled masses being dragged upwards by the power of the law. Leave it to Harvard to take the training ground of the conservative corporate advisors and turn it towards the “democratization” of corporate governance. Leave it to Harvard to undertake the remaking of concepts of corporate governance in a way that empowers shareholders whose interests may be short-term and inconsistent with long-term measured corporate growth.
It is not clear where they will turn next, but this kind of success is not going to do anything except further inspire Professor Bebchuck and his hearty band. The shopping list of corporate democracy demands includes broad proxy access, greater ratchet on comp, independent board chairs, and independent board majorities.
While no doubt entrenched boards beholden to management sometimes in the past led to failure to respond to favorable takeover bids and to over-compensation of top executives, the causes for these lapses are many and complex and cannot be made to disappear by granting greater power to shareholders. The small shareholder is and will remain without power. The larger shareholders have, and are legally entitled to, their own agendas; those agendas may be short term and short sighted and not consistent with healthy corporate growth or innovation.
Two lessons emerge: first, this initiative will ultimate fuel the M&A market; second, directors had better start listening more closely to Professor Bebchuck, whose message and flat presentation have not exactly made him the darling of the corporate speakers’ circuit around Boston. He is single-handedly remaking corporate governance in America and he is doing it under many radar screens that ought to be picking up the incoming blips.