New York City Comptroller Scott Stringer wants to bring a kind of direct democracy to corporations.
He’s teaming up with institutional investors, including some of the country’s largest public pension funds, to lobby 75 companies to allow shareholders to nominate directors for election to their boards.
The investors will have to hold more than three percent of the company’s stock for more than three years to qualify but even so, David Nadler, a principle at Nadler Advisory Services, thinks companies will resist.
“The cost and the time and distraction of potentially dealing with contested board elections, I think, is not good for the enterprise,” he says.
Nadler consults with boards and executives on leadership and corporate governance issues and thinks, on the whole, companies have become more responsive to their shareholders in recent years. He doesn’t think these changes would be worth the hassle they’d cause.
“The old boys’ network is still in place,” he says. “You know, ‘a friend of a friend of a friend’ is serving on these corporate boards, but we need certain expertise. We need more diversity. If you put more women and people of color on boards, studies show that the company does better.”
If companies don’t agree to Stringer’s changes, shareholders would have to vote to approve his proposal next year. Even then, companies wouldn’t have to adopt it. But Stringer says he and his pension fund allies will just keep coming back.
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