Your paper highlights the fact that “the legal rules themselves are partly a product of an agency problem, as insiders might use direct corporate lobbying efforts in ways that serve their own interests.” Of course, institutional investors can’t influence regulatory activities using such corporate funds and this is one major reason why we lost access rights.

One flaw in the paper, or at least I certainly hope it is a flaw, is the assumption “that individual investors, who invest in publicly traded firms either directly or indirectly through institutional investors, are too dispersed to become part of an effective organized interest group with respect to investor protection.”

Apparently, that is what many would like us to believe. As I recall, the only representative of individual investors invited by the SEC to roundtable discussions on proxy access was Evelyn Y. Davis, who kept insisting she was “prettier” than Nell Minow. Yet, groups of individual investors in countries outside the US have been critical in achieving reforms and protections.

On a State Department sponsored visit to Korea to discuss the need for corporate governance reforms several years ago, I visited with representatives of People’s Solidarity for Participatory Democracy (PSPD), specifically their Participatory Economy Committee. The PSPD uses shareholder proposals, civil and criminal lawsuits and lobbying to improve corporate governance. I’m sure many other countries have similar organizations.

The United Shareholders Association, a now defunct group financed by Texas oilman T. Boone Pickens, played a largely positive role in the 1980s here in the United States and might have accomplished much more, had it continued.

You should consider revising your model to include such a possibility, especially given the key role that individual investors play in several of your “predictions” (hypotheses).

Prediction 5: Investor protection will be higher when the fraction of the electorate that directly or indirectly owns shares in public companies is large.

Prediction 8: Investor protection will be higher when individuals investing (directly or indirectly) in public companies are more financially educated and when the media is more active.

Prediction 9: Investor protection will be higher following scandals or crashes that make the problems of insider opportunism more salient.

Clearly individual investors can have an important role to play in establishing investor protections, even if they were largely ignored in the SEC’s recent deliberations regarding proxy access.