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- Title
GOLDEN LEASH ARRANGEMENTS: A LEGAL AND POLICY ANALYSIS.
- Authors
MIHALIK, ANDREW
- Abstract
It is common practice for activist shareholders proposing a slate of dissident nominee directors to pay their dissident nominees a flat fee and to indemnify them for legal liability in consideration for standing election. In several recent proxy contests, however, activists have entered into "golden leash" arrangements with their dissident nominees under which they agreed to provide their nominees a share of the profits realized on the activists' position in the target company after a fixed period of time, should the nominee be elected. Although many have called for golden leashes to be made illegal, criticisms of these arrangements have generally been on policy grounds. This article assesses the legality of golden leashes against the backdrop of these policy arguments. It argues that although the policy concerns giving rise to criticisms against golden leashes are sufficiently serious to merit attention from regulators, golden leashes do not in themselves violate corporate or securities laws. Golden leashes should remain prima facie legal, since it is open to securities regulators to use the public interest power to intervene in certain situations without having to compromise the shareholder franchise. The article proposes that regulators require disclosure of these arrangements in proxy materials and clarify the regulatory definition of director independence.
- Subjects
POLICY analysis; SHAREHOLDER activism; ACTIVISTS; ELECTIONS; CORPORATE lawsuits; SECURITIES industry laws
- Publication
University of Toronto Faculty of Law Review, 2016, Vol 74, Issue 1, p49
- ISSN
0381-1638
- Publication type
Article