Today marks the 75th anniversary of the Communications Act of 1934. For most of its existence, the Communications Act provided much of the essential regulatory structure for the telecommunications (in Title II of the Act) and broadcast (in Title III) industries. The former provided some of the basis for my own practice back in the 1990s as an associate at a large Chicago law firm, one of whose primary clients was American Telephone & Telegraph Co. (or “AT&T,” as at one point it was formally renamed).

Of considerably broader importance, the Communications Act created the Federal Communications Commission (FCC), which has had an extraordinary effect over the decades on the American economy and society. Not so long ago there were calls to abolish the FCC, but they have not achieved success.

This is not to suggest that the FCC is riding high in all respects. 

Senator Charles Schumer recently announced plans to introduce the “Shareholder Bill of Rights Act of 2009.”  This bill is a compendium of corporate governance reforms that shareholder activists have been advocating for many years.  Among other things, the bill would require companies to elect the entire board of directors each year, rather than putting only a portion of the board up for a vote.  It would also require that directors receive a majority of the votes cast before being allowed to serve, and the bill would make it easier for shareholders to nominate their own director candidates to run in opposition to the candidates nominated by management.

Senator Schumer’s bill is best understood as embodying the principle that, when it comes to corporate governance, more democracy is always better.  The assumption is that corporate governance will improve in tandem with increased shareholder voting power.  I question that assumption.

First, more democracy might actually lead to worse directors.