The Corporate Governance Implications of Presidentialism

The U.S. Supreme Court has pushed the United States into a new system of public governance, “Presidentialism,” which gives unprecedented economic regulatory power and enforcement power to the President. Compensation arrangements designed to align shareholder and managerial interests now give the President additional power to obtain corporate compliance with preferred policy positions because of the concentrated firm-specific pecuniary stakes of managers and directors. In the name of protecting the democracy against authoritarian over-reach, we need new corporate governance institutions that insulate decision-makers from this pecuniary pressure, here, a Public Integrity Committee at the board level, compensated without stock and protected through staggered terms. Similarly, the exposure of asset managers to pressure over their stewardship voting strategies call for divestment of voting authority to decentralized but autonomous voting offices. This preserves the efficiency of centralized fund administration and portfolio assembly and marketing while divesting the asset manager of voting authority that makes it a potential target of Presidentialist pressure.