The need for independent directors

As you know, I have long advocated the value of independent directors in the middle market. They bring perspective and diversity to family businesses in particular, and more subtly, help keep the conversation focused on business issues rather than emotional ones.

The SEC is now proposing for comment, landmark changes that will allow small groups of shareholders to force the addition of independent directors.The proposal would permit large shareholders — typically institutional investors like pension funds or hedge funds — or alliances of shareholders to nominate as many as one-quarter of the directors. For the 700 largest public companies, the proposal would require approval by 1 percent of the shareholders for a dissident slate to be nominated. For smaller companies, it would be either 3 percent or 5 percent, depending on the size of the business.

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