In his inaugural address this week, President Barack Obama said "our economy is badly weakened, a consequence of greed and irresponsibility on the part of some," and due in part to "our collective failure to make hard choices."

He's offered few policy specifics other than saying we need to undertake massive new infrastructure and education programs. But he is right, there are a lot of hard choices we need to make. And one of them is the decision to fix the way public companies are managed.





First, Congress needs to pass legislation giving shareholders enhanced rights to elect new boards, submit resolutions for stockholder votes, and have far more input on executive compensation and other issues. As companion to these reforms, Congress needs to pass legislation that prevents managers from making it more difficult for shareholders to exercise their ownership rights.

Managers often come up with creative ways to perpetuate their reigns of error. These include myriad takeover obstacles like poison pills, bylaw provisions, and others devices that thwart shareholder efforts to hold managers accountable.

If Congress is reluctant to make wholesale changes at the federal level, it can enact one simple provision that would allow many of the needed changes to take place on the state level: It can give shareholders the right to vote to move a company's legal jurisdiction to a more shareholder-friendly state such as North Dakota. Currently that decision is in the hands of company boards.


What we need are measures that let the capitalist system produce jobs and economic activity, with minimal but effective government oversight. Government spending is an important catalyst to economic gains, but we need to focus on improving the way private companies are managed so private capital can flow into them.

Our private sector is the greatest wealth creation machine ever devised, far outperforming any other economic model. Still, major improvements could do a lot to mitigate what Mr. Obama calls "the sapping of confidence across our land."

Lax and ineffective boards, self-serving managements, and failed short-term strategies all contributed to the entirely preventable financial meltdown. It is time for battered shareholders to fight back.

Mr. Obama was right when he said that "it has been the risk-takers, the doers, the makers of things . . . who have carried us up the long, rugged path towards prosperity and freedom."

I hope this means that the day of reckoning has come for those executives who simply feed at public and private troughs, putting little or no capital of their own at risk, and who produce little of value for the national economy.




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