Opinion: How to Fix Corporate Boards

Today, if any public company shareholder wants to nominate any one or more candidates to be elected by all shareholders to a company's board of directors, that shareholder must foot the bill and jump over an extraordinary number of hurdles to do so. The out-of-pocket costs are at minimum a million dollars (for lawyers, mailing, and proxy solicitors). They must run against an incumbent board's campaign paid for entirely by shareholders.

"Proxy access" would allow shareholders, if they were able to demonstrate that they held shares in a company for a certain period of time, to nominate one or more individuals to be elected to the board on the company's own proxy (so the challengers wouldn't have to pay the freight costs of mailing out the proxies). If the challengers make their case on why they should get a seat at the table as opposed to an incumbent, they should have a seat at the table. May the best directors -- not only the friends of the CEO -- serve.

Shareholder activist Carl Icahn supports this initiative but wants to limit the right to nominate a director to shareholders holding a 5% stake in the company. That's not a problem for him of course, but it defeats the whole notion of "proxy access," which is that if you hold one share in a company, you have a right to air your views and suggest a legitimate candidate to run.

Opponents of proxy access basically make the case that shareholders aren't smart enough as management to nominate people to serve on the board. They say groups such as the AFL-CIO and Teamsters will "hijack" the process and seek to use it to further their "extremist" views. They also like to criticize shareholders calling for change as not having the "long-term interests" of other shareholders in mind.

Citi was criticized for having an obfuscated corporate structure and lack of corporate strategy years ago. The company responded by saying critics were being short-sighted when the stock was in the $50s. "Let our vision for a financial supermarket play out," they said. They repeated the same thing when the stock was in the $40s, $30s, and $20s. Last Friday, the stock dipped below $2. Are shareholders supposed to still shut up and sit on their hands waiting patiently for the all-seeing and all-knowing Citi managers to dig themselves out of this mess? Of course not.