Last week, a conservative panel of judges on the D.C. Circuit’s Court of Appeals-the second-most important court in the land-struck down an effort to inject a tiny bit of democracy into corporate governance.

The back story is a bit turgid, but bear with me. The SEC, in an effort to enhance shareholder rights, enacted a rule that permitted shareholders who have owned 3 percent of a corporation for at least three years to nominate a slate of directors in opposition to those proposed by the incumbent board of directors. Additionally, the company would be required to circulate the alternate slate’s names, and a brief statement, in conjunction with the board’s own nominated slate of directors. This rule was a small step toward turning the now perfunctory process of board elections into true democracy.

The D.C. circuit struck down the rule (PDF), saying that the SEC had acted in an arbitrary and capricious manner, not adequately considering the costs to corporations of burdens imposed by being required to include and circulate this information. Corporations, of course, spend untold millions promoting and compensating their entrenched incumbent board members. Yet even this one small effort to open the door to corporate democracy was slammed shut.

Why […]