October 26, 2009
I am pleased to see the SEC re-visiting the issue of facilitating shareholder nomination of directors.
Nomination of directors by management creates a clear conflict of interest for directors. They receive compensation due to decisions by management management receives compensation due to decisions by directors.
It is not surprising that the compensation levels have become exorbitant and offensive.
Because of the current system of nomination, corporate directors are not the most capable people for the job. Instead, they are retired astronauts, college presidents, retired generals -- respectable people, but chosen to be compliant with management.
As a result, corporate governance has been ineffective. The societal cost has been huge.
I favor the proposal to facilitate shareholder nomination of directors. I ask you to go a step further, and REQUIRE shareholder nomination of directors, and disallow management nominations.
It is most difficult to see corruption when it is everyday business for a long time. But management nomination of directors is clearly corrupt. It is bad practice to allow people to choose their own bosses, who will pay them with somebody else's money.