John Ford's classic Western "The Man Who Shot Liberty Valance" immortalized the line: "When the legend becomes fact, print the legend." This phrase captures how conventional wisdom, rather than fact, underlies the pressure on the Securities and Exchange Commission to adopt a rule to facilitate election contests for public company directors.

This proposed rule, which is often referred to as proxy access, would facilitate election contests by allowing activist shareholders to use the company's annual proxy materials to solicit other shareholders. This contrasts with current practice under which activists must pay for the preparation and mailing of materials to campaign for their own nominees.

As the SEC moves toward a final vote in the next few months, the proposal has generated passionate debate and a near-record number of comment letters. Opponents of proxy access fear that it risks turning every corporate election into a costly and disruptive contest. Advocates, principally unions, state pension funds, hedge funds and academics, press the dated stereotype that boards will remain insufficiently accountable unless the likelihood of removal is increased.

The reality is that three major changes in corporate governance since 2003, when the SEC first considered proxy access, have substantially enhanced the ability of shareholders to express their dissatisfaction and hold boards accountable.

First, the emergence of activist hedge funds has made the likelihood of director removal less remote as the number of proxy contests in the Russell 3000 related to director removal has increased by more than 50%, from 66 in 2003 to 126 in 2009, and the success rate has gone from 38% to slightly over 50%.

Second, even in uncontested elections, board accountability has been enhanced by the widespread increase in majority voting for director elections coupled with an increase in directors receiving against or withhold votes. In 2003, most directors in uncontested elections were governed by a plurality-vote standard whereby a director would be elected by receiving the highest number of votes even if representing less than a majority of the votes cast. Majority voting was designed to address this issue by requiring directors to resign if they failed to obtain a majority of the votes. Between 2004 and 2009, the number of S&P 1500 directors that had at least a 40% against or withhold vote rose from 47 in 2003 to 223 in 2009.

Third, the extent to which boards are directly engaging a dialogue with shareholders has increased since 2003. Martha Carter of proxy advisory firm RiskMetrics Group Inc. recently stated, "We're hearing from proponents that they're not only able to get contact with the board ... they're telling us those discussions are very productive."

The major catalyst for the SEC revisiting proxy access was the financial crisis. There is, however, no evidence that before the crisis shareholders were even seeking to address the issues of risk management or the extent to which compensation structures encouraged excessive risk taking or short-termism. Of the more than 100 contested solicitations in 2007, only three addressed risk management, excessive leverage or the need to enhance the long-term nature of compensation.

Despite the apparent inevitability of proxy access, there is still a way for the SEC to mitigate the most overreaching aspects of proxy access without undermining the principle of shareholder democracy. The adoption of an "opt-out" provision would allow shareholders to modify or reject entirely the application of proxy access. There are thousands of public companies, and an opt-out would allow shareholders to decide whether proxy access is appropriate or, at a minimum, tailor it to the specific circumstances of their company.

Predictably, unions and state pension funds, which have exerted the most pressure on the SEC to adopt proxy access, oppose an opt-out. They take the rather Orwellian view that shareholder choice would undermine shareholder democracy.

Notwithstanding this opposition, the alternative of an opt-out provision provides the SEC with a final opportunity to craft a compromise that will allow shareholders to decide whether boards are so indifferent and disengaged that a federal mandate on director elections is needed. As the SEC stated when it submitted the proxy access proposal for comment, "Investors are best protected when they can exercise the rights they have as shareholders, without unnecessary obstacles imposed by the federal proxy rules."

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John Finley, a senior corporate partner with the law firm Simpson, Thacher & Bartlett LLP, is a member of the advisory board with the program on corporate governance at Harvard Law School.