Jonathan Macey on why corporate directors are susceptible to capture

Jonathan Macey tackles the issue of Director Capture in an insightful piece at the Icahn Report. A brief excerpt:

In my recent Princeton University Press book Corporate Governance: Promises Made: Promises Broken I apply capture theory, which is usually used to describe and model the behavior of bureaucrats in the public sector, to the directors of publicly traded companies who come to their positions through the board nominating committee.

In my view, such directors are highly susceptible to capture… even more susceptible than bureaucrats and politicians. Capture is inevitable because management controls the machinery of the corporate election process. Management’s narrow interest in having passive and supportive boards manifests itself in the appointment of docile directors who are likely to support management’s initiatives and unlikely to challenge management or to demand that managers earn their compensation by maximizing value for shareholders.

He promises to tackle the problem of shareholder democracy in an upcoming post, too.