William Ruckelshaus describes how the U.S. got serious about environmental issues with the creation of the Environmental Protection Agency 40 years ago in his Saturday commentary in the Wall Street Journal. The turning point from the “race to the bottom” came when the public demanded action.
If that’s where shareholders and the larger public are today on corporate governance issues, directors should take notice. A top-down standard setting enforcement process of the 1970s isn’t going to fix the more complex issues today. He concludes that “people affected by change have to be deeply involved in crafting of solutions” and “we have to get better at both involving people in the process of change and providing them with enough information to make that involvement useful and worthwhile.”
While he’s talking about environmental issues, couldn’t that be applied to boards and shareholders?
As Bonnie Hill has observed in her years as a director engaging with shareholders, “We have learned so much from our interaction with shareholders. It has made us better directors.”
The world has changed. We can’t fight the last war or use yesterday’s solutions to solve today’s problems. The new tools are more direct engagement with shareholders, not to pacify them but to involve them in the long-term investment of our companies.