Currently, the nomination process is controlled by corporate management. Management presents a slate of directors to the shareholders for approval, but there is no alternative to the management slate, and no easy way to for shareholders to present an alternative. During the Bush administration, a proposal was presented to the SEC to allow shareholder nominations for directors. SEC commissioners voted down the proposal in a party-line vote, with the Republican majority prevailing.
It is all too easy for management to nominate candidates who are compliant and inclined to vote large bonuses for management. No alternative choices are presented to the shareholders. These directors then become attractive candidates to serve on additional corporate boards. The conflict of interest is blatant. No particular knowledge of business or a particular industry is necessary, so you often see retired generals and astronauts, university presidents or other prestigious candidates without business experience.
This system, where management controls the nomination process for company directors, contains intrinsic conflicts of interest. It is institutionalized, systematic corruption. And it is the legal and everyday way to conduct business in America today.
It is disappointing to me that the financial reforms recently enacted have not included a reform of the process of nominating directors. Shareholders should have not only a right, but an obligation to nominate the directors who will supervise the management of publicly traded companies.