We hear an awful lot of debate over a wide range of governance issues - proxy access, executive compensation, poison pills - among governance aficionados, in courtrooms, and in boardrooms.

Actually, most of these are easy questions, or should be. Isn’t the resolution to many of these debates simple, at least to a smart investor? Let’s dispose of many of these right here and now.

Allow proxy access...

Investors own the corporation, and the proxy materials. We want to put our own candidates on those proxy materials. If we investors want to limit which one of us can do this, say through some form of private ordering, we’ll take care of it in the bylaws.

...And simple director nominations

Eliminate advance notice requirements, and director qualification screens. Smart investors don’t need these artificial barriers to learning about director nominees.

Separate the CEO and BoD Chair

While we’re at it, we don’t need the CEO on the BoD. The BoD hires and supervises the CEO, and it compromises completely director independence for the CEO to serve on the BoD. It’s easier to invite the CEO into BoD meetings to provide an “executive perspective” than it is to figure out when and how the CEO needs to recuse himself from BoD discussions and votes.

Majority rules in director elections and bylaw amendments

And, it’s a majority of the shares voting, not shares outstanding. At the BoD, these two important decisions almost always require only a majority of the votes of the directors present. The same majority vote rule should apply to direct shareholder votes. For director elections, get rid of the “withhold” idea, and just count votes for and against each candidate.

Allow shareholders to call special meetings and act by written consent

If enough shareholders want something, we should get it. This includes calling a special meeting for any reason, and acting by written consent in lieu of a meeting. So, what’s “enough”?

1. ❖For written consent, the same majority (of shares outstanding, since it’s not a contested matter) needed to elect directors and amend the bylaws.
   

2. ❖For a special meeting, a small but meaningful percentage (say, 10% of the shares outstanding?), since the meeting itself doesn’t change anything, anymore than merely nominating a director candidate to doesn’t elect her to the BoD.
   

Forget say-on-pay

With duly- and fairly-elected directors, shareholders don’t need any input to exec comp.

No social responsibility resolutions

Dispense with this complete usurpation of the corporate governance process for private needs that has little or nothing to do with broad investor interest.

Eliminate poison pills

These have evolved from a defense against “coercive” tender offers to an absurdly low limit on the number of shares a given investor can own.

Leave proxy advisors alone

Proxy advisors provide private consulting and administrative services to investors. In the absence of complaints from clients (haven’t really heard any) the SEC has no business regulating them any more than they do regulating McKinsey or MacKenzie.

Preserve BoD neutrality

Directors should not take a public stand on controversial shareholder votes:

1. ❖which directors to elect
   

2. ❖whether to approve a corporate transaction
   

or on any decision in which the BoD might have a conflict of interest.

End the pointless debate on the role of the BoD

We waste so much ink, bytes, and wind trying to figure out what the BoD should “do”, and making the BoD “effective”. Investors elect directors to do one thing very well: watch over their investment. Their first and main job is to hire and supervise management, serving in a fiduciary capacity representing shareholders. Similarly, directors take material decisions affecting the investment, such as on significant expenditures, that shareholders don’t want to leave to executives alone. Forget everything else: collegiality, experience as a CEO, serving as an advisor to executives. We wonder about executives that need too many advisors, and in the rare cases that they do, they should hire a good consultant.

So, why do these easy questions become hard? Executives and their lackeys use them up barriers to proper shareholder oversight of investments, of course.

There are some truly hard questions, that get to the heart of how investors should relate to executives. We’ll tackle these in a subsequent posting.