Getting in tune

21 January 2015 By Reynolds Holding Follow @holdingren

A commissioner at the watchdog raised the stakes by calling the university’s shareholder-rights advocates deceptive. Dozens of professors howled, while former SEC lawyers jumped to the official’s defense. Catty tone aside, it’s a corporate governance debate that needs to happen.

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A Boston University law professor on Jan. 20 joined a public dispute over Harvard Law School’s Shareholder Rights Project, whose advocacy for certain corporate governance practices has been called deceptive and possibly illegal by a senior U.S. Securities and Exchange Commission official and others.

Boston’s Tamar Frankel said SEC Commissioner Daniel Gallagher’s accusations against the program were inappropriate and perhaps unethical for a sitting official.

At issue is a December 2014 research paper by Gallagher and Stanford University’s Joseph Grundfest, a former SEC commissioner. The paper suggested the agency could sue Harvard for not disclosing evidence against a governance measure the Shareholder Rights Project advocates: making directors face elections annually rather than every two or three years.

The Harvard project advises activist investors and helps them draw up resolutions calling for the elimination of so-called staggered boards, which make it harder to replace a majority of directors at one time. Gallagher and Grundfest’s paper said proposals using the project’s wording were so one-sided that they could be “false and misleading.”

A group of 34 senior law professors called the paper’s charges “deeply flawed” and urged the authors to withdraw their accusations.

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