VC Strine and Access

We have devoted a number of posts on this Blog to criticisms of VC Strine's views, whether expressed in law review articles, speeches, or opinions.  So we also deem it appropriate to disclose moments of agreement.  VC Strine is nothing but prolific.  The Business Lawyer published a relatively recent speech given by the Vice Chancellor, "Breaking the Corporate Governace Logjam in Washington:  Some Constructive Thoughts on a Responsible Path Forward."

In the speech/article, he more or less takes the position that some type of shareholder access should be provided under Rule 14a-8.  The views are not a sudden appreciation for an increased federal role in the governance process but exactly the reverse.  Without access, pressure will build for federal preemption.  As he describes:

• Just as unsurprisingly, some advocates for corporate managers have celebrated the SEC's wisdom by running to the corner flag and taking their shirts off in exultation.  But the match isn't nearly over and I"m not sure the reprieve of another proxy season without the AFSCME Rule amounts to much more than winning a disputed call on a mid-pitch throw-in.  In fact, what worries me from a  corporate law federalists perspective is that a debate that had started as one about a nationally mandated system of subsidized electoral competition and had evolved constructively into a conversation about whether the election exclusion under Rule 14a-8 stymied the exercise of core state law rights would degenerate back into its original form.  That is, with institutional investors prevented from advancing company-specific bylaw proposals by way of Rule 14a-8, its seems conceivable that many of them may return to their prior advocacy of an across-the-board federal mandate requiring that corporation put out -- in the form of a proxy -- the equivalent of a corporate ballot with two slates of candidates.  And if that is on the table, other ideas for federal regulation, such as mandated reimbursement of slates meeting a certain level of success, might be as well.  

Or, as he said in a more pithy fashion:  "More pragmatically, one can also view an obstinate objection to the AFSCME Rule as, in the long term, increasing the risk that federal action will be taken to mandate that all public companies adopt certain election practices favored by institutional investors." 

Finally, VC Strine notes that had access been allowed, it would have weakened those promoting say on pay.  In effect, shareholders would have the ability to influence pay by electing directors to the board.  This would take pressure off the need for direct involvement in the compensation process.  As VC Strine notes:  "The combination of the AFSCME Rule, the decreasing prevalence of classified boards, and the emerging prevalence of so-called majority voting would, in combination, make credible the argument that the federal government should not tamper with state law entrusting executive compensation solely to the board, without stockholder involvement."

On say on pay, he is probably right.  Access would in many ways replace the need for an advisory vote on compensation.  He is likewise correct, as we have noted on the Blog more than once, that the strident opposition to access was short sighted.  With the advent of regime change in Washington, access can be expected to return to the forefront.  Moreover, there will be little interest in the SEC's proposal concerning an access bylaw.  The pressure will be to allow shareholders direct access to the proxy statement for their nominees.  Had the bylaw proposal been put in place, pressure for this type of reform likewise would have abated.