Opinion: How to Fix Corporate Boards

These criticisms have no merit. Any potential director up for re-election to a board of directors -- incumbent or challenger -- should make his or her case on why they deserve the seat. Shareholders can judge for themselves. Large shareholders like Capital Research, Legg Mason(LM) and Vanguard regularly spend a lot of time and effort studying how to vote. Other large shareholders aren't as fastidious, but hopefully that will improve over time. Shareholders can tell if a potential director is a crackpot, an extremist or simply a pawn of the CEO who will do nothing more than rubber-stamp decisions.

When the SEC allows "proxy access," my prediction is that it won't result in a huge number of shareholders rushing to use the power they've been given. Inevitably, some will, and they'll be successful. These few litmus-case examples will do more for improving corporate governance in America than any SarbOx-like legislation could.

There are other changes the SEC could make to improve corporate governance. For example, any director on a board for a company that goes bankrupt or sees its stock price drop by more than 90% in 12 months (like the aforementioned Lehman directors) should have to resign any other corporate boards he/she sits on and not be able to take any future directorships on a public company for the next 10 years.

The risk of being fired by shareholders through proxy access will always be in the back of the minds of corporate directors. This will indirectly lead to incumbent directors asking tougher questions and better corporate governance. And that will benefit all shareholders in the long-term.

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