May 8, 2008

Fare Thee Well Paul Atkins; Hello Troy Paredes

As the end of his term nears – and after six years in office – Republican SEC Commissioner Paul Atkins announced that he intends to leave the Commission “once a successor is appointed and takes office.” Well that may be soon since President Bush has already nominated Professor Troy Paredes as Atkin’s successor (as noted in this article). Given the speed of this nomination, the confirmation hearings may be upon us shortly.

So it looks like the Senate will consider the confirmation of three SEC Commissioners at once – Troy and the two Democratic candidates, Luis Aguilar and Elisse Walter. Three new Commissioners at once is beyond rare; according to this chart, it would be the first time it has happened since the Commission was formed in 1934.

By the way, Peter Schwartz recently wrote a pretty nice piece about Commissioner Atkins in his “Soap Box” (scroll down to April 28th entry).

I think it will be cool to have someone named “Troy” as a Commissioner. You may recall that was Fred Flintstone’s nickname in Episode 140 when Fred became a surfer hipster dude and kept saying “Yeah, yeah, I’m hip, I’m hip.” My friends made me a “Troy” T-shirt in college… The First Governance Site

I’ve been a long-time reader of Jim McRitchie, who is Editor of, a site that has been up over a decade and where Jim essentially has been blogging that entire time on his “News” page (even before there was blogging software available).

In this podcast
, Jim provides insights into what it’s like to be a long-standing reporter on corporate governance issues, including:

– What led you to create a decade ago?
– How has the site evolved over time?
– What have been the biggest surprises in managing the site?

The Future of Corporate Law: Symposium Notes

Below is a great example of the useful types of information that Jim McRitchie provides on

In the current issue of The Delaware Lawyer, a variety of practitioners and academics (including Lucian Bebchuk, Robert Thompson, Michael Dooley and Charles Elson) present brief appeals for reform of Delaware’s corporate statutes. Many of them, joined by professors Jennifer Hill, Brett McDonnell, Faith Kahn, Elizabeth Nowicki, and Ann Conaway, discussed their proposals for reform at the Delaware General Corporation Law for the 21st Century Symposium on May 5th at the Widener University School of Law in Wilmington.

Most Americans have become “forced capitalists” as companies have moved from traditional defined benefit pensions to 401(k) plans for employees, said Vice Chancellor Leo Strine Jr., a judge in Delaware’s Court of Chancery, at the lunch address. These forced capitalists invest in the market through intermediaries or money managers, Strine said. He calls it “separation of ownership from ownership.” (Experts look at corporate law statute,, 5/6/08)

Robert Thompson noted that “self-help” measures are important for shareholders. Delaware statutes have gaps with regard to that need. If Delaware doesn’t address the need directly, it will likely lead to a patchwork of Federal provisions. Shareholders must be able to check directors when they are conflicted or entrenched. There has to be an effective way to exercise their franchise which cannot be redirected by the board. Delaware should write statutes which make Federal preemption less likely.

Charles Elson said that times change. As great as the Delaware corporate law scheme is, we need changes to better protect investors. Forty years ago, we were in a different era. Now, stock is aggregated and held by largely by institutional investors who are more sophisticated. They don’t need protected by management. Shareholders need a way to replace directors, not just vote them down. Shareholders don’t have the right to direct day to day operations and shouldn’t. However, for directors to be accountable to shareholders, we need the threat of a real election. Make the election a vibrant process by allowing reimbursement for short slate contests instead of the current asymmetry where corporations only pay for one side. I get nervous when managers view themselves as the corporation. Elson has proposed a statute that would reimburse shareholders for the cost of putting forth a competing slate of directors if they are successful or nearly successful in getting people on the board.

Rick Alexander argued that five mergers were shot down by shareholders recently. The market is doing its job. Directors have a lot of information that isn’t publicly available. There are legitimate differences. We’re not going to maximize the economy by going with what 51% of stockholders think. What about the rights of the other 49%? Directors take their jobs very seriously. They know that failure to adopt resolutions that get a majority may cost them their jobs because ISS will recommend voting against them.

Jennifer Hill said the US hasn’t looked much to developments in other countries. The federalist system provides competition for corporate charters in the US. Common law may be better than civil law. However, the idea that the US operates similarly to other common law countries is a misconception. In the UK and Australia changes happens much more frequently. SOX didn’t give shareholders participatory rights, only some additional protection of their rights through disclosure and liability. In Australia and the UK a raft of recent laws have strengthened rights with provisions such as “say on pay.” Bainbridge and Stout argue shareholders don’t want rights. However, for Hill, News Corporation’s move from Adelaide was instructive. Institutional investors wanted charter provisions to render inapplicable certain Delaware laws in order to maintain Australian rights where corporate constitutions can be changed by shareholders, meetings can be convened by 100 members, and no poison pills are allowed.

– Broc Romanek