Shareholder democracy and executive compensation

The WSJ discusses moves by shareholder activists to get firms to adopt requirements that directors be elected by majority vote.

A glass-half-full sort of person might see this as an example of how corporate governance reform can happen even without new federal mandates, under current state law governance rules.

The glass starts looking more empty when one considers that it's labor groups that are pushing these moves.

And the glass gets emptier still when one sees that the lever they're using is executive pay. As the WSJ says:

For unions, the majority voting rules represent an opportunity to rein in executive pay and have more say inside the boardroom.

And the article adds, paraphrasing a lawyer interviewed for the article:

the combination of such rules and proposed toughened federal standards on disclosure of executive pay will help add clarity to complex executives pay packages. . . Once investors begin to see the extent of executive pay, they could start calling for the removal of compensation committees that approved the pay deals.

In other words, this is all about the unions using the pay issue to get directors who are favorable to their interests. Or using corporate governance procedures to get leverage in pay negotiations. Perhaps they're hoping that executives give more to the unions in order to save their own pay.

Either way, can these developments be good for "ordinary investors"?  They provide some insight on who really gains from the SEC's moves toward executive compensation disclosure.  More on that in my executive compensation archive.