With serious questions around the Securities and Exchange Commission's plans to revamp board election, as reported in The Wall Street Journal, it's worth looking at alternative proposals to institutionalize shareholder rights and powers. Earlier this year, the SEC wanted to seek comment on two conflicting and controversial proposals. Number one allows companies to exclude investor proposals related to director elections. The second, broader plan would allow investors that hold at least 5 percent of a company's stock greater leeway to propose board candidates in exchange for more disclosure about their operations. It's come under fire from Democratic lawmakers, unions and pension funds. The SEC is set to vote on the two proposals that address whether and how shareholders can propose changes to company bylaws that would allow shareholders to nominate their preferred candidates to the board but with Republicans dominating the SEC, it means that a proposal largely favored by business - which confirms the SEC can disallow such a move - is likely to pass. And there lies the political problem.

This is what makes the alternative proposal from Stanford Law School's Joseph Grundfest so interesting.

The proposal, contained in his paper The Wizard of Oz, the United States Constitution, and Corporate Governance talks about applying the equivalent of Article II Section 2 of the United States Constitution to the corporation. That provision requires that a majority of the Senate confirm Presidential nominees, forcing the President to negotiate with the Senate in order to obtain the necessary Senatorial approvals.

"Imagine importing Article II Section 2 into the world of corporate governance. Cast shareholders in the role of the Senate and incumbent boards in the role of the White House," Grundfest writes. "In this regime, no director can be elected unless she or he is approved by a majority of the shareholders.

"Just as the President has to worry about whether a nominee will be confirmed by the Senate, incumbent directors have to consider shareholder support for the incumbent slate. Incumbent directors then have a powerful incentive to avoid candidates opposed by the shareholder base. And, just as the President negotiates with the Senate, the incumbent board has an incentive to negotiate with shareholders over policy accommodations that might be necessary to garner shareholder approval.

"The same system of advice and consent written into Article II Section 2 of our Constitution can thus be grafted onto our corporate governance mechanism. It generates a set of checks and balances that forces incumbent boards to pay careful attention to shareholder concerns, and induces incumbent directors to reflect the shareholder sensitivities as the price of re-election."

Interesting idea. But University of Illinois law professor Larry Libstein makes the excellent point in his blog that it would run into exactly the same problems that confronted Sarbanes-Oxley. Well-intentioned but it's a one-size-fits-all approach that won't work.