How to strengthen shareholder democracy

Commentator Ian Ayres

KAI RYSSDAL: Annual shareholder meetings are still on tap this month, though they are fewer and farther between. Sharper Image held its annual meeting today but it was uneventful. The company avoided a proxy fight over directors by settling with a group of investors in advance on joint candidates for the board.

Things often don't go so smoothly, though. In fact, this proxy season shareholders made headway, often to the chagrin of management, on proposals from majority voting to sexual orientation bias. Management is getting nervous. But commentator Ian Ayres says all management needs to do is brush up on history.


IAN AYRES: A big problem in any election, whether political or corporate, is rational apathy.

Voters figure their choice has only an infinitesimal chance of affecting the outcome so why bother voting?

This problem of rational apathy is even worse for small shareholders. If you own a tiny bit of GM's zillion shares, why bother casting your ballot?

Well, we learned about democracy from the Greeks, so why not take another page from them?

Earlier this month, a leading Greek political party took up arms against the apathy problem.

They selected their candidate for mayor of one city by using a "deliberative poll."

It worked like this. A random sample of 160 citizens from across the political spectrum met with six candidates for a day.

In the end, the group picked one guy to be the mayoral candidate.

Eighty percent of the participants had never heard of this guy before. But if they could all agree on him, then the leading political party was listening.

So why not apply the idea of deliberative polls to corporate voting?

All you have to do is select a representative sample of shareholders and pay them to deliberate on an issue. Just like a raffle. The more shares you own, the larger the chance of you being asked to send representatives.

In lots of corporations, people like you and me with just a few shares own a large percentage of the company. In that kind of a company, small shareholders would have a big representation.

Using this method doesn't mean automatic backing for shareholders' initiatives. In fact, management could use the poll to educate shareholders on issues that are hard to understand.

For example, I know there's a shareholder movement out there to cap manager pay. Perhaps shareholders who deliberated for a day would surprise us and say they strongly reject that notion.

Deliberative polling is the perfect antidote to voter disinterest. It's a way for corporations to learn what informed shareholders really want.

RYSSDAL: Ian Ayres teaches at Yale Law School and Yale's School of Management.

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