From today's Wall Street Journal (subscription required), we learn that the SEC staff is considering "an option to require shareholders to arbitrate their disputes with corporations instead of bringing litigation," one of the recommendations pushed in the recent studies urging deregulation of the capital markets. According to the Journal, this would "realign" the balance of power between shareholders and managememt "at a time when that balance has tipped increasingly toward shareholders."
Such a reevaluation of corporate governnce practices is being considered in order to ensure US-listed public corporations and exchanges remain "competitive" with those from other jurisdictions. Of course, it's hard for me to understand how undermining the rights of those individuals who actually own the companies in question will help encourage further investment.
According to the article, SEC chairman Christophen Cox has a history of seeking to limit what he sees as excessive securities litigation. But critics say that the proposed three-member arbitration panel tend to favor industry as opposed to consumers (i.e. investors). Some consumer groups are worried that "by curbing shareholder litigation, the nation will lose a powerful deterrent to corporate wrongdoing."
It's also questionable whether such s shift toward arbitration is even compatible with securities law, which presents the remedy to shareholders to join in on class action lawsuits.