Title: Shareholder Activism as a Corrective Mechanism in Corporate Governance
Abstract: =2141410. But see, K. J. Martijn Cremers, Lubomir P. Litov & Simone M. Sepe, Staggered Boards and Firm Value, Revisited (July 14, 2014) (unpublished manuscript), available at SSRN: http://ssrn.com/abstract=2364165 (finding staggered boards to be positively associated with shareholder wealth maximization). However, empirical studies have not been able to show that corporate governance activism targeting other types of corporate governance arrangements enhances shareholder wealth. According to Brav, Jiang, Partnoy and Thomas, corporate governance activism does not enhance shareholder wealth when it involves an attempt to repeal takeover defenses, replace a CEO, increase board independence, or limit CEO compensation. Brav et al., supra note 97, at 1731. Bhagat and Black demonstrate that enhanced board independence does not increase shareholder wealth. Sanjai Bhagat & Bernard Black, The Uncertain Relationship Between Board Composition and Firm Performance, 54 BUS. LAW. 921, 924, 928, 932 (1999). See also Barry D. Baysinger & Henry N. Butler, Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition, 1 J.L. ECON. & ORG. 101, 101–04 (1985). Adams, Hermalin and Weisbach describe studies that show how splitting the CEO and chairman of the board positions does not enhance shareholder wealth. Renee B. Adams, Benjamin E. Hermalin & Michael S. Weisbach, The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey, 48 J. ECON. LITERATURE 58, 81–82 (2010) (surveying the literature on the separation of CEO and Chairman). Ali C. Akyol, Wei Fen Lim, and Patrick Verwijmeren find statistically significant negative returns associated with the SEC’s attempts to provide proxy access to certain shareholders. Ali C. Akyol, Wei Fen Lim, & Patrick Verwijmeren, Shareholders in the Boardroom: Wealth Effects of the SEC’s Proposal to Facilitate Director Nominations, 47 J. FIN. & QUANTITATIVE ANALYSIS 1029 (2012). See also Thomas Stratmann & J.W. Verret, Does Shareholder Proxy Access Damage Shareholder Value in Small Publicly Traded Companies?, 64 STAN. L. REV. 1431 (2012). Such studies create a presumption that activism encouraging such corporate governance arrangements are not good for the target firm and therefore requires the activist to make a convincing case that such changes can indeed enhance shareholder value. In contrast to offensive shareholder activism, the burden of proof is now on the activist, not the other way around. 165. Brav et al., supra note 97, at 1731. 166. Bainbridge, The Business Judgment Rule, supra note 42, at 109. 01.SHARFMAN.FIN (DO NOT DELETE) 5/22/2015 4:56 PM BRIGHAM YOUNG UNIVERSITY LAW REVIEW 2014
Publication Year: 2014
Publication Date: 2014-09-01
Language: en
Type: article
Access and Citation
Cited By Count: 11
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