How to Make Transparency Work: Activist

The simple solution here for the proxy advisors is to break up the consulting services from the ratings services, so there is no conflict. Ensuring there is sufficient competition will also help them keep their quality up.

The problems of credit ratings agencies' poor ratings and a pay-to-play business model are well-documented. Yet, these groups have the infrastructure, reputations, and could build up the expertise in corporate governance to level judgments against companies. Like proxy advisory firms, market actors would pay attention to their views if they could get their house in order.

Some will advocate for a government agency to bridge the gap here on being a domain expert overseer on topics like corporate governance and executive compensation. However, Ken Feinberg's tenure as pay czar -- however, well-intentioned -- makes me skeptical that such a solution could really be effective in the long-run.

Those of us in favor of better corporate governance and tighter links between executive pay and performance need to see the truth in Lessig's critique of transparency. More data dumps in to the backs of SEC filings won't fix anything. We need domain experts looking at every board, every deal, and every potential transgression, rendering judgments. Fixing the proxy advisory and credit ratings firms is the best way of doing that.

-- Written by Eric Jackson in Naples, Fla.