CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Too Much Democracy in Corporate America?

Too Much Democracy in Corporate America?

Wednesday, 20 August 2014 04:35

That's the complaint of Steven Davidoff Solomon in a NYT column today. His complaint is that three people, who are small shareholders, repeatedly bring resolutions that have to be voted on by all shareholders. His argues that these resolutions rarely pass, however they cost the companies tens of millions of dollars a year to field votes.

There are two problems with the logic of this argument. First, we have no sense of the potential payoffs from these resolutions. Since most corporations are largely controlled by top management they able to secure pay for themselves that is two or three times what they would get working in comparable positions in countries like Germany or Japan. If a resolution can bring compensation more in line with the company's international competitors, it can save shareholders hundreds of millions of dollars a year in excessive payments.

The other issue is whether these resolutions might result in changes in corporate behavior even if they are not passed. The study from the Manhattan Institute which provided the basis for the column did not consider this issue. If a resolution causes companies to change their behavior by calling attention to improper practices then it can have large benefits for shareholders even if it is not approved. 

Comments (2)Add Comment
written by Last Mover, August 20, 2014 6:05
If so, perhaps it is time to put an end to the personal crusade of a few against corporate America.

Uh huh. Corporate America already crushed the power of class action suits which eliminates any possibilty of the same people going after them individually as well due to absurd high expense.

Now they're upset when individuals go after them.

Goddamn stockholders. Who do they think they are anyway, persons? The only "crusade" that's been going for the last 30 years has been against employees, consumers and now stockholders.
written by Benedict@Large, August 20, 2014 2:16
As long as they are such small shareholders, why not just buy them out at a price they can't resist. Even if they're some green or other political group, they have budget needs that a buyout could advance. Just buy them out with a condition they won't buy back in.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.