When lawyer and corporate governance icon Ira Millstein was once asked a quarter century ago why institutional investors submit shareholder resolutions on issues such as requiring a majority of independent board members, he responded, “Because they can’t submit the one resolution they really would like.” When asked what that would be, he said simply: “They would like to ask the board to do better.”
Faced with the legal and practical impossibility of asking the board to do better, early advocates of improved corporate governance focused instead on the structural reasons why boards “did worse.” They quickly coalesced around the need for non-executive, independent board members. Given the situation then, that made sense. Overly cozy relationships between directors and management were blamed for quiescent boards that failed to govern. But that was 25 years ago.
