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Legal Ethics and Professional Responsibility

Selected Works

2017

Corporate governance; corporation law; activist-nominated directors; director compensation; golden leash; shareholder activism; activist investors; institutional investors; event study; share pricing; governance innovations

Articles 1 - 1 of 1

Full-Text Articles in Law

How Corporate Governance Is Made: The Case Of The Golden Leash, Sean J. Griffith, Matthew D. Cain Ph.D., Jill E. Fisch, Steven D. Solomon Oct 2017

How Corporate Governance Is Made: The Case Of The Golden Leash, Sean J. Griffith, Matthew D. Cain Ph.D., Jill E. Fisch, Steven D. Solomon

Steven Davidoff Solomon

This Article presents a case study of a corporate governance innovation — the incentive compensation arrangement for activist-nominated director candidates colloquially known as the “golden leash.” Golden leash compensation arrangements are a potentially valuable tool for activist shareholders in election contests. In response to their use, several issuers adopted bylaw provisions banning incentive compensation arrangements. Investors, in turn, viewed director adoption of golden leash bylaws as problematic and successfully pressured issuers to repeal them. The study demonstrates how corporate governance provisions are developed and deployed, the sequential response of issuers and investors, and the central role played by governance intermediaries …