Although the process of selecting corporate directors is described in terms that
track the political election process—director “candidates” are “nominated” and
“elected,” just as political representatives are—there have always been significant
differences between political and corporate elections. Director candidates are
generally nominated by the incumbent directors, not by shareholders. Few corporate
elections involve more than one “candidate” for any director position.
And proxy “campaign” materials are funded by the corporation and include
only those candidates nominated by the incumbent directors, although other
shareholders may prepare, and circulate at their own cost, proxy materials for
their own candidates.
In recent years, shareholder activists have argued with increasing vigor that
the corporate election process should be more open and, in particular, that excluding
shareholder-nominated director candidates from the corporation’s proxy
materials undermines shareholder democracy. Corporate traditionalists, on the
other hand, have pushed back, arguing that facilitating direct shareholder access
to the corporate proxy could make corporations vulnerable to special interests,
increase the pressure on boards to focus on short-term rather than long-term
shareholder value, and result in fragmented and ineffective boards.