Access and the Myth of Inadequate Numbers of Qualified Directors

John Castellani, President of the Business Roundtable, asserted before the Senate Banking Committee in testimony on Wednesday, Nov. 14, that allowing shareholder access to the proxy statement would "discourage qualified, independent directors from serving,"  Now, this Blog supports some reforms championed by the Business Roundtable, most noticeably its petition to reform the Shareholder Communication Rules.  But on this issue we part company.  While access may discourage some directors from standing for reelection (particularly those who might lose to a shareholder candidate), the implication of the comment by Castellani suggest that there will not be a qualified replacement ready to stand in the director's shoes. 

Is this the case?  The median compensation for outside directors in the Fortune 500 is $165,000.  Moreover, for some of the companies, the pay is double or triple that amount.  We have noted a number of examples where the company pays at least some of its directors in excess of $500,000.  Countrywide is an example, as is Exxon-Mobile.  In a country of 300 million people, many with deep corporate experience and prodigious education, can it really be claimed with a straight face that with those kinds of payments, there are not enough qualified people to sit on boards of public companies? 

At most it can be said that changes discouraging some directors from remaining in office (unproven speculation, by the way) may necessitate the creation of a larger pool of prospective directors.  In the end, Castellani's comment really amounts to opposition to this idea.  We won't speculate on the motivations but will note that a larger pool may make it harder to create "mirror image" boards.