Corporate Boards and Corporate Democracy

Abstract

This paper argues that the US corporate scandals symbolised by Enron represent a challenge to corporate governance not adequately addressed by reforms of 2002 including the Sarbanes‐Oxley Act and proposed rule changes by the SEC (Securities and Exchange Commission) and NYSE (New York Stock Exchange). These changes reflect a minimalist approach to corporate governance and its regulation. The intent is to provide the minimal amount of regulation of governance in order to keep investors committed to stock markets. Effective reform in corporate governance means making corporate boards more representative and democratic. This position draws on the work of legal scholars arguing for more diversity on US corporate boards and builds on the presumed advantages of diversity for better decision-making and strategy formulation. Among the proposals made are that there should be at least two candidates for each board seat, nominations should come from shareholders, the board and employees, and that a majority is required for election to the board. Board elections must also be ratified by a majority of employees of the firm. This is designed to provide a middle ground between the German concept of co-determination and the US approach of self-perpetuating oligarchic boards. There are many legal, ideological and political barriers to these forms but if representative governance and democracy are truly valued, they should be applied to an institution that has huge impact on the lives of individuals and communities in the contemporary world. ● Board of