“The latest antidote to what ails U.S. corporations is to run them more like New England town meetings,” writes Deborah Solomon in today’s Wall Street Journal.

“It’s not just at Walt Disney Co., where the board stripped Chief Executive Officer Michael Eisner of his chairman’s title after he failed to win support for his board re-election from 43% of votes cast by shareholders. Marsh & McLennan Cos. just agreed to nominate a director recruited by institutional investors after months of negotiations. New rules at scandal-tarred MCI, formerly known as WorldCom Inc., will require the board to solicit director nominations from holders representing at least 15% of its shares.”

“Now the government is pushing for even more shareholder democracy. The Securities and Exchange Commission is weighing a rule that would allow, in limited situations, shareholders representing at least 5% of voting shares to put their own board nominees alongside management’s choices on a company’s official ballot. Making it easier for dissatisfied shareholders to nominate candidates will help prevent fraud and prod executives to act more in shareholders’ interests, says SEC Chairman William Donaldson. The agency is expected to make a decision in May.”

“A bill pending in the California legislature would go further, requiring any companies doing business in the state to permit nominations by investors who have held at least 2% of the shares for two years.”

“Corporate executives and business lobbies are pushing back. They say such steps would foster dissent among directors, allow shareholders with agendas to hijack boards and put a costly burden on companies already buried in new corporate-governance rules. Others say the SEC plan would give too much power to large, institutional investors.”

” ‘There are lots of special interests that will try to use the rule as leverage to further their own agenda,’ says Stephen Odland, chief executive of AutoZone Inc., a chain of auto-parts stores. ‘That will divert attention from serving the interests of all shareholders.’ “

“The move toward greater shareholder democracy comes in the wake of corporate scandals that have rocked investors’ faith in management and the boards who are supposed to be looking after shareholders’ interests. But this isn’t the first time the SEC has considered giving shareholders a greater say in deciding who will manage their companies. Throughout corporate history, the pendulum has gone back and forth on the question of how involved shareholders should be — especially when it comes to the composition of company boards.”