ABSTRACT

In the corporate governance arena, shareholders are voters, boards of directors are electoral representatives, proxy solicitation is like an election campaign, and corporate charters, bylaws, and codes operate as constitutions. Shareholder democracy is vividly present in how Berkshire Hathaway makes decisions on charitable contributions of the company. In the universe of shareholders of a company, there may exist several diverse groups with unique investment objectives of their own. As owners, shareholders have specific rights, such as the right to elect board members, to ratify the appointment of independent auditors, approve executive compensation plans, and propose changes to the governance of the company through submission of shareholder proposals. The minimum number of directors on the committee should be three, all of whom must qualify as independent. The need for change in the board composition may arise from forces such as activist shareholders or changes in the regulatory requirements.