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Kraft, Cadbury Deal Shows Governance Gap

Stocks in this article: KFT CBY

Odysseas Papadimitriou is founder and chief executive officer of Evolution Finance, the parent company of Wallet Blog and Card Hub, an online marketplace for credit cards.

NEW YORK ( TheStreet) -- In a New York Times article in November, Andrew Ross Sorkin explored the corporate governance implications of the proposed takeover of the British confectioner Cadbury (CBY) by the American company Kraft Foods (KFT). The article says the boards of British companies act as advisers, but the decision to sell is up to the shareholders.

Since the article was written, the takeover of Cadbury by Kraft has been complicated by various developments, but the issues discussed by Sorkin still hold. Sorkin used the proposed takeover as an opportunity to discuss the corporate governance differences in the U.S. and U.K.

In the British system, shareholders have more control over the future of their investments. In the American system, much of the control of the company is ceded to corporate boards, so takeovers generally require the board's blessing to move ahead.

While I applaud Sorkin for presenting both sides of the issue, the debate over whether a company ought to be controlled by its investors or its board is innately dangerous. What is really being discussed here is the viability of democracy. While Sorkin's story focuses on whether shareholders have the expertise to know how companies should be run, the broader implication is whether the average person has enough sense to be responsible for his vote.

Average people should be empowered to make decisions concerning their welfare. This includes having the ability to take a position, by voting, on issues that will affect them fiscally. This is true of national and state elections, and it should also be true for corporate decisions. Otherwise, the implication is that the average person can't be trusted to make decisions for themselves and that a "board of directors" of sorts is necessary for other decisions involving a vote.

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