Consequences to directors of shareholder activism
By: Ian D. Gow, Sa-Pyung Sean Shin, Suraj Srinivasan
Contributors: Shin, Sa-Pyung Sean, author; Srinivasan, Suraj, author; Harvard Business School
Series: Working paper / Harvard Business School -- 14-071; Working paper (Harvard Business School) -- 14-071
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston
Language: eng
Number of pages: 51
Description: We examine how shareholder activist campaigns affect the careers of directors of the targeted firms. Using a comprehensive sample of shareholder activism between 2004 and 2011, we find that directors are almost twice as likely to leave over a two-year period if the firm is the subject of a shareholder activist campaign. While it has been argued that proxy contests are an ineffective mechanism for replacing directors, as they rarely succeed in getting a majority of shareholder support, our results suggest that director turnover takes place following shareholder activism even without shareholder activists engaging in, let alone winning, proxy contests. Performance-sensitivity of director turnover is also higher in the presence of shareholder activism. We also find that director election results matter for director retention: directors are more likely to leave in the year following activism when they receive lower shareholder support. Contrary to consequences on the targeted firm's board, we find no evidence that directors lose seats on other boards, a proxy for reputational consequences, as a result of shareholder activism.
Notes: "January 2014" -- Publisher's Web site.

Includes bibliographical references (pages 37-38).