SEC Aims to Make Board Elections More Democratic

Critics, though, say it shouldn't be a true election. "Democracy is good in government, but we should not rush into that in business. Business is different," says Keith Bishop, a securities attorney and partner with Buchalter, Nemer, Fields & Younger in Los Angeles. "The political model doesn't work here -- shareholders change too quickly. You have to tie decision-making to sound economic analysis, not an idealized view of corporate governance."

Granting investors increased involvement in electing corporate directors will only lead to expensive annual battles that could drain the resources of boards and distract them from their function, Bishop says. "Every year directors will have to argue why they should be elected vs. a shareholder's nomination," he says. "It can have a destabilizing effect."

Corporations themselves, not surprisingly, have argued vehemently against such measures, most adding that the new round of regulations targeting corporate governance was quite sufficient. ExxonMobil(XOM - Cramer's Take - Stockpickr), for instance, submitted its comments to the SEC, saying that granting shareholders access to the proxy statement "would be detrimental to good corporate governance" and urged the agency to "stay on course with the significant corporate-governance reforms already enacted."

The SEC is still seeking comments, and will draw up official regulations after the next comment period ends -- likely by September.