Stephen M. Bainbridge, who has been consistently wrong about just about everything since his defense of excessive CEO compensation more than 20 years ago, continues his losing streak with a blog, to make ad hominem attacks on those who want to hold the managers of public corporations accountable, meet their obligations as fiduciaries, or legitimize the concept of capitalism by protecting their investments
In a current post, Bainbridge is reduced to trying to characterize shareholders as "thin-skinned" for having the temerity to challenge his attacks. I suppose this is consistent with his overall approach that corporate managers should be unfettered by any constraints from those whose capital is at risk as well.
I've spent the better part of my career crossing swords with these folks and I find them a remarkably thin skinned bunch. Call them "self-appointed" or "gad flies" or "water carriers for left liberal organizations like unions" and they get all offended.
Presumably, this is his attempt at humor. If people are offended, I suspect it is for being mischaracterized. Once again, he is wrong on the facts and wrong on the law.
The first rule of credible disagreement is being able to state your opponent's point in a manner that meets their approval. The second is a willingness to assume the same intentions on the part of both sides. If there are water carriers for the left, you had better identify and criticize the water carriers for the right.
I actually agree with Bainbridge's point that good lawyers advise their clients on the best way to meet the requirements of the law to pursue their interests, though I would not use the word "circumventing" to describe the duties of an officer of the court in upholding the law. The legal system benefits from vigorous and rigorous application of the law by all parties, and I assume that he grants that right to shareholders as well.He quotes J.W Verret, who is writing an article about 16 "defenses" for companies to use to prevent shareholders from availing themselves of their rights under the forthcoming proxy access regulations, and who got all excited about Jim McRitchie's actually paying attention to what he was writing. "I haven’t seen such acerbic rhetoric since I testified next to Nell Minnow [sic] of the Corporate Library when the House Financial Services Committee was first considering proxy access in 2009. Rhetoric and invective, however, are a poor substitute for reason." Yes, he might want to take that last point under advisement; it better describes his testimony, with unsupported and shrill claims about the irresponsibility and bad motives of shareholders (with loving disregard of any potential parallel concerns about corporate managers -- and how's that working out on Wall Street?). I'd love to see a citation for the "acerbic rhetoric" he attributes to me. My only recollection is asking him to support his outlandish assertions -- and his silence in response. And any documentation for his claims that fiduciary institutional investors have any motive other than sustainable value creation over the long term? Still crickets. Instead all we get is his suggestion that boards defer all of their decisions to an executive committee made up of only their own appointed directors to avoid being sullied by someone who might disagree.
Let's do the math, shall we? Proxy access will not put anyone on the board unless a majority of the shareholders vote in favor of the candidate. No director will be elected without the support of a wide and very heterogeneous range of institutional and individual shareholders. That is what capitalism means. Proxy access and majority vote provisions are the best way (I am sure Professors Verret and Bainbridge will agree that it is far better than government intervention) to mitigate agency costs and align the interests of managers, directors, and investors and prevent the kinds of abuses that led to the atrocities of the subprime and derivatives era, and the Enron, Worldcom, Adelphia, Global Crossing, era before that.
Nell Minow - Editor