Corporate Governance

Most arguments about the state versus the market seem fundamentally misguided to me, begging, as they do, false premises. Many have noted that the state underlies the ability to trade goods on the market. What attributes of a bundle of property rights are alienable, what contracts can be enforced, default conditions, etc. are all defined by laws enforced by the state.

But I want to consider a reverse interaction between state and market, so to speak. I focus here on how many private actions are not only of public concern, but even are made as part of a political process. Market actors often take actions that in other systems would be delegated to the state. Consider proposals for voting on at the annual meeting of a corporation, which can be of two types:

• Company-sponsored resolutions,
• Shareholder resolutions brought forth under the Securities and Exchange Commission (SEC) Rule 14a-8.

Many resolutions are about pay, or the process for setting pay, appointing independent directors to the committees that set executive compensation, etc. Both Lenin and Hayek consider the question of "who-whom?" as political, even if we leave much of the answer to the result of the interactions of private actors. But many laws you might see debated in Washington, I think, resemble certain shareholder resolutions. My impression is that such resolutions might treat working conditions in China that must be satisfied for parts built into products distributed in the United States, environmentally responsible methods of production, etc. Many of these political resolutions for controlling corporate behavior may have low likelihood of enactment. They are, I think, more about raising consciousness.

I think it would be interesting to find a database of proxy resolutions. One could then confirm my claim above about many being political. Could one classify proxies, especially shareholder-sponsored ones, into various categories? Could the number in such categories be used in some sort of Instrumental Variable (IV) analysis or correlated over time with anything of interest? Broadbridge Financial Solutions provides support to many companies in electronic voting of shareholder proxies at corporate annual meetings. As far as I could see, they only provide access to the statement of proxy resolutions to shareholders of the company to which the resolution applies. Other possible sources of proxy resolutions are the SEC and organizations that track socially responsible investing.