Monday, November 2, 2020
Political and Corporate Governance (and a Note on Mindfulness, for Good Measure)
Since almost all of us are thinking about Election Day 2020 (tomorrow!), I am taking a moment here to reflect on conversations I recently have had with my students about parallels in political and corporate governance. Although current conversations center around the fiduciary duties of those charged with governance (a topic that I will leave for another day), just a few weeks ago, we were focused on voting (both shareholder and director voting). The above photo shows me--sporting wet hair and rain-spotted, fogged-up glasses--waiting in line to vote early last week. I admit that while I routinely vote in political elections, I have only been to a shareholder meeting once, and then as an advisor to the corporation, not to actually vote any shares held. Having said that, in my fifteen years of law practice, I did draft proxy materials, structure shareholder meetings, and address concerns associated with shareholder voting.
My students are always curious about shareholder voting and most intrigued by proxy voting. Corporate governance activities are, of course, not very transparent in daily life for most folks. A course covering corporate law introduces both new terms to a student's lexicon and new concepts to a student's base of knowledge.
Shareholder voting certainly has some commonalities with political voting (for example, proxy cards and ballots have a similar "feel" to them, and both systems of voting involve elections and may also involve the solicitation of approvals for other matters of governance and finance). Yet the system of proxy voting in the corporate world knows no real parallel in political governance, and the Electoral College knows no parallel in corporate shareholder voting. Moreover, the hullabaloo in 2020 about voting fraud in the political realm seems very foreign in a corporate space that allows people to appoint others to vote for them under the authority of a signature. (I say this knowing that proxy voting can be affected by miscounts and that challenges can be made to proxy cards in proxy contests in the "snake pit" or "pit," as it may be referred to more informally.)
The system of shareholder voting sometimes seems a bit old-school, despite the advent of electronic proxy materials, online voting, and virtual shareholder meetings--a hot topic of conversation this year, starting back in the spring, when many firms had to move to virtual meetings on an emergency basis due to the COVID-19 pandemic (as the U.S. Securities and Exchange Commission and others well recognized). Although shareholder voting on blockchains may be the wave of the future (see my coauthored article referencing that, available here), today's shareholder voting mechanics still involve somewhat traditional balloting and ballot tabulation. Because shareholders can vote in person at the shareholder meeting (even if that may rarely be done), both digital and manual systems must be available to count votes. Although, when a quorum is present, the election of directors may be ordained before the meeting even begins (especially when plurality voting obtains), the election results cannot be released until the voting ends. That happens at the shareholder meeting.
Political voting also can seem a bit antiquated--especially with this year's hand-marked ballots replacing electronic voting machines because of COVID-19. Registered voters can cast their ballots early in many states or can vote in person on election day. Depending on circumstances, some registered voters may be able to vote by absentee ballot or by mail, but in any case, their votes are tabulated electronically. There are no quorum or meeting requirements. The required vote typically is a plurality, which may be difficult to ascertain on Election Day (depending on how many absentee ballots are received and when/how they are counted). Given the fact that a vote of the Electoral College, rather than the popular vote, actually elects the President of the United States (i.e., voters merely determine the composition of the Electoral College), in close presidential elections, the election results may not be available on or even soon after Election Day. Thus, while there are common elements to shareholder and political voting, especially as to elections (other than those for the President), voting in corporate governance and voting in political governance situations can be quite different.
Having noted these comparative and contrasting reflections on voting in the corporate and political contexts in honor of Election Day, I recognize that, for many, it is difficult to be impassive about Election Day and voting this year. Students, colleagues, friends, and family members have expressed to me their hopes, fears, enthusiasm, and anxiety about, in particular, tomorrow's presidential election. Whatever the result, some will be relieved, and some will be disappointed.
As a student and teacher of mindfulness practices, I am compelled to note that they can be very useful in moments like these. They can promote calm, considered, dispassionate reactions and decision-making, and research evidences they can have impacts on the brain that are correlated with stress reduction. Of course, I recommend mindful yoga. But meditation, breath work, mindful walking, and other activities through which the brain is able to focus on what is here now, in the present moment (and not on what was or will be), can be helpful in producing a calmer state of mind.
Cheers to voting and mindfulness practices! I recommend both as Election Day fast approaches. And I have already done the voting part . . . .
Oo. Frank! Nice points. Yes, I see the connections you are making. I take your point about the parallels, especially for public companies with dual class voting.
But it is also true that the Electoral College is a fixed structural system set up to achieve a particular balance (perceived to be needed to correct inequities in the popular vote in a presidential election), whereas dual class/class voting is much more tailored and customized to the firm, sometimes reaching beyond elections, and not necessarily designed to provide balance or offset inequities. The existence of super-voting stock can, for example, evidence a power grab by a funder with undue leverage (because of a firm's specific financial needs at a given time). As a result, I ultimately see class voting as a more flexible, creative tool with multiple possible purposes.
Your further thoughts are always welcomed!
Posted by: joanheminway | Nov 2, 2020 9:48:39 PM
Isn't there a parallel between the Electoral College and the voting that goes on when a corporation has different classes of stock? Some shareholders have far more voting power per share than do others.
Aren't voting by classes and the Electoral College are both designed to protect certain groups against oppression by more numerous groups?
Posted by: Frank Snyder | Nov 2, 2020 9:24:40 AM