Should the system be changed so that directors are elected by popular vote? The directors who receive the most votes are elected to the board. Should there be a minimum number of positive votes that each candidate has to receive before she/he can be elected to the board?


Boards of directors have numerous duties and responsibilities.


  • They provide advice and council to the managers of the firm.

  • They help to provide legitimacy; they are the face of firm and can positively influence the perceptions that external stakeholders have of the firm.

  • They act as useful communication links with the firm’s external environment.




Furthermore, directors bring unique individual-specific resources to the firm by virtue of their human capital. Each director has a unique skill set that represents that individual’s experience, expertise, reputation, and links with other networks and organizations. An individual is chosen to be on the board of directors based on the unique skill set of that person and the resources needed by the firm.
If directors were elected by popular vote then the firm may not end up with directors that have the requisite skill sets that are need to enhance the firm’s performance. This is one reason why firms propose a slate of directors. The shareholders then either vote in favor of the slate or they withhold their vote.
One proposal to improve corporate governance is to require each director receive a minimum number of votes or a certain percentage of votes. In this way, a firm can propose a slate of directors, but if the shareholders do not consider an individual to be acceptable then they can voice their opinion by withholding their vote for that director. If the director does not receive the minimum votes, then that individual cannot join the board and so the firm is forced to find another individual who has the unique skill sets that the firm desires as well as being acceptable to the shareholders.

Business

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