Proxy Access and the Internet Age: Using Electronic Shareholder Forums to Improve Corporate Governance

Abstract

On November 28, 2007, the SEC voted to amend federal proxy rules in two ways. The first amendment clarified the SEC’s stance that corporations may exclude shareholder proposals for nominees to the company’s board of directors from the company’s proxy materials. The second amendment was designed to encourage the use of electronic communications between companies and investors. These SEC actions constituted a partial response to a longstanding debate concerning the role of shareholders in corporate governance. This Note argues that innovative uses of web-based technology could resolve many contentions issues concerning shareholder participation in corporate elections and ultimately improve the quality of corporate board elections from the perspective of corporate boards and shareholders. Despite their early state of development, electronic shareholder forums present corporations with the clear opportunity for low-cost, beneficial interaction with shareholders. With a proper investment of time and due consideration, electronic communications with shareholders stand to improve corporate performance without dramatically altering structures of corporate governance.