Proxy Access and Optimal Standardization in Corporate Governance

According to conventional wisdom, “one size does not fit all” in corporate governance. Firms’ governance needs vary, implying that the optimal corporate governance structure for one company may not work for another. This one-size-does-not-fit-all axiom has featured prominently in arguments against numerous corporate law regulatory initiatives, including the SEC’s failed Rule 14a-11—an attempt to impose mandatory, uniform “proxy access” on all public companies—which the D.C. Circuit struck down for inadequate cost–benefit analysis.

In a recent paper, I present an alternative theory on the role of standardization in corporate governance—in which investors prefer standardized terms—and empirical evidence that is consistent with … Read more