The SEC tiptoes toward arbitration

The WSJ says that the SEC staff, spurred by a Committee on Capital Markets Regulation suggestion, is studying "whether corporations should be permitted to amend their bylaws to allow for arbitration."

I'll probably have more to say about this proposal as the debate develops. Arbitration is one way to curb the excesses of lawyer-driven shareholder suits, which right now involve significant costs and often questionable benefits.

Of course governance mavens and trial lawyers will fiercely oppose this move and, to be sure, arbitration is not perfect. But it's important to keep in mind that we're talking about corporate internal governance which should be, and largely is, governed by contract.

The issue, in my view, is not whether the SEC should "allow" this, but whether the SEC should have anything to say about it. The SEC has blocked public offerings with waiver provisions. But the SEC should stick to disclosure regulation, and not get into internal governance.

In any event, this issue is worth watching.

Comments

[save_the-rustbelt]

I'm not a big fan of trial lawyers, but I do see arbitration being used to bypass civil rights for employees, bypass any reasonable recourse for consumers and investors, etc.

And this from lawyers who took an oath, blah, blah.....

[Nobody]

The Delaware bar will never let this happen.