Interest in corporate governance has increased exponentially over the last several years, as has shareholder and governmental pressure – often successful – for companies to change how they are governed. Since 2002, we’ve seen Sarbanes-Oxley, Dodd-Frank, higher and sometimes passing votes on a wide variety of shareholder proposals, and rapid growth in corporate efforts to speak with investors. And that’s just for starters.
These developments represent the latest iteration of what has become part of our normal business cycle – scandals (e.g., Enron, WorldCom, Madoff, derivatives), followed by significant declines in stock prices, resulting in public outrage, reform, litigation, and shareholder activism. Now that the economy is rebounding, should we anticipate a return to “normalcy” (whatever that may be)? Are we back to “business as usual”?
Gazing into a crystal ball can be risky, but I’m going to take a chance and say “no.” While our economic problems have abated, I believe that the past is prologue – in other words, we’re going to continue to see more of the same: investor pressure on companies, legislation and regulation seeking a wide variety of corporate reforms, and the like. Some more specific predictions follow:
- Increased Focus on Small- and Mid-Cap Companies: Investors have picked most if not all of the low-hanging governance fruit from large-cap companies. Sure, there are some issues that may generate heat and some corporate “outliers” that investors will continue to attack. However, most big companies have long since adopted such reforms as majority voting in uncontested director elections, elimination of supermajority votes and other anti-takeover provisions, and shareholder ability to call special meetings, to name just a few. If investors (and their partners, the proxy advisory firms) are to continue to grow, Continue Reading The shape of things to come in corporate governance