With the smoke still swirling on the Dodd-Frank regulatory reform bill, Compliance Week readers are doubtless turning attention to how governance provisions in the bill (or possibly the law, by the time you read this) will affect corporations and investors. That’s as it should be; the legislation promises to hand shareowners more say in director nominations and executive compensation in ways that we have flagged in the past. For now, however, let’s turn to a striking but under-appreciated legacy of this epic battle. Dodd-Frank readjusts the balance of power in boardrooms, but it also illuminates a potentially tectonic power shift in Washington. For the first time, investors showed—in dramatic fashion—that they can go head to head against the established business lobbies and win.
Consider the Sarbanes-Oxley Act of 2002, the last major overhaul in corporate governance statutes. Investors were almost nowhere in that struggle. Instead, the measure was driven by then-Delaware Senator Paul Sarbanes, who in turn was reacting to popular revulsion at the Enron and Worldcom scandals. In the House, U.S. Rep. Michael Oxley actually fought the initiative—until he bowed to the pressure of grassroots sentiment. (One wag suggested the bill should have been titled the “Sarbanes-Sarbanes-Sarbanes-Oxley Act.”)
