June 25, 2010
Yockey on Corporate Governance
Joseph W. Yockey has posted On the Role and Regulation of Private Negotiations in Governance on SSRN with the following abstract:
in corporate law continue to give
shareholders greater levels of power over public companies. Instead of
using their power to seek changes within firms through such traditional
means as proxy contests and litigation, shareholders are increasingly
relying on private negotiations with directors as a key component of
their governance activities. Regulations enacted in response to the
recent financial crisis will likely trigger even more widespread use of
negotiations in the years to come.
In this Article, I analyze the legal and policy implications generated by the use of private negotiations as a means of corporate governance. I make two related claims. First, I contend that negotiations provide shareholders and boards with several unique benefits that will often make them a more desirable method for resolving intra-firm differences than traditional means of corporate communication. In this sense, negotiations add value by filling a governance gap. Secondly, however, I argue that board-shareholder negotiations may never realize their full potential in governance due to current restrictions on corporate speech – namely, the SEC’s Regulation FD. The way in which Regulation FD impedes private negotiations stands at odds with many of the SEC’s own policy goals. To address this tension, additional regulatory intervention will be required for negotiations to continue to play a valuable role in governance.
June 25, 2010 | Permalink