The wall at the Ellis Island Immigration Museum may seem like a strange place to go to understand investor reaction to last month’s milestone decision in the Disney case. But some truths are universal and cut across both time and place. The museum quotes an Italian immigrant who stepped off the boat in New York about a century ago: “Before I came to America I had heard that the streets were paved with gold. But when I got here, I discovered three things. First, the streets were not paved with gold. Second, they were not paved at all. Third, they expected me to pave them.”
For good or ill—and we’ve heard arguments both ways—courts are not prepared to bring even clearly asleep directors to book. U.S. lawmakers are neither willing nor able to do that job either. The Disney decision leaves no ambiguity: If institutional investors expect boards to be awake and operating to advance shareowner interests, the investors themselves will have to make sure that happens.
