Golden Leash

DEFINITION of 'Golden Leash '

Special incentives offered to directors being nominated to serve on the board of a company by a major shareholder. A golden leash is designed to offer an incentive to the nominee directors to act in the interests of the major shareholder, which is typically an activist hedge fund or other institution that is seeking to introduce major change in the target company’s strategic direction. 

BREAKING DOWN 'Golden Leash '

The concept of a golden leash is criticized by proponents of sound corporate governance, since special incentives offered to directors may compromise their independence and lead them to favor their backer’s agenda, rather than serve in the best interests of all shareholders.

The term “golden leash” has become part of popular financial parlance following the acrimonious proxy fight between Canadian fertilizer giant Agrium and its largest shareholder, activist hedge fund Jana Partners. In the summer of 2012, Jana proposed that Agrium spin off its retail business so as to boost shareholder returns. However, Agrium steadfastly rejected Jana’s proposal on the grounds that splitting up its retail and wholesale businesses would jeopardize its finances and erode shareholder value. Jana responded by proposing a new slate of directors to serve on Agrium’s board, but stirred controversy when it was revealed that its four nominee directors would receive a percentage of the profits that Jana earned on its shareholdings of Agrium, within a three-year period commencing September 2012. Agrium deemed this as a “golden leash” arrangement that was unheard of in Canada and said it created a clear conflict of interest that refuted the independence of Jana’s nominee directors.
 

RELATED TERMS
  1. Directorate

    An organization headed by a director. In finance, directorate ...
  2. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  3. Annual General Meeting - AGM

    A mandatory, public yearly gathering of a publicly traded company's ...
  4. Dummy Director

    A person on a company's board of directors who votes and acts ...
  5. Shareholder Activist

    A person who attempts to use his or her rights as a shareholder ...
  6. Outside Director

    Any member of a company's board of directors who is not an employee ...
Related Articles
  1. Markets

    Jana Partners: An Activist Investor Analysis

    Learn about Jana Partners, a hedge fund founded by Barry Rosenstein. Read about new positions in ConAgra and Qualcomm the fund took in 2015.
  2. Managing Wealth

    The Top 5 Positions in Barry Rosenstein's Portfolio (QCOM, HTZ)

    Take a look at the top five holdings for billionaire investor Barry Rosenstein, founder of activist investment advisory fund Jana Partners.
  3. Managing Wealth

    Safeway: An Activist Investment Analysis (SWY)

    Find out how Barry Rosenstein and hedge fund Jana Partners pushed Safeway into a change of ownership despite its controversial "poison pill" defense.
  4. Markets

    Marathon Petroleum Corporation: An Activist Investment Analysis (MPC, MPLX)

    Learn about Jana Partners' 2012 activist campaign with Marathon Petroleum. Find out how the hedge fund influenced the spinoff of a master limited partnership.
  5. Investing

    Walgreens Boots Alliance: An Activist Investment Analysis (WBA)

    Find out how Jana Partners, led by activist investor Barry Rosenstein, used a 1.2% stake to influence Walgreens' corporate strategy and gain two board seats.
  6. Markets

    Agrium Acquires Cargill's Retail Operations

    Arguably best known as one of the triumvirate of companies that own Canpotex, the North American marketing group for the crop nutrient potash, Agrium (NYSE: AGU) is actually a diverse producer ...
  7. Investing

    Proxy Season 2016: Most Wonderful Time of the Year

    Each year, public companies hold shareholder meetings where individual and institutional investors vote on the future. Here is what to watch in 2016.
  8. Investing

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  9. Investing

    iRobot Beats Back Activist Investor's Proxy Fight

    A fierce proxy battle between iRobot (NASDAQ: IRBT) and one of its largest shareholders, private equity firm Red Mountain, has come to an end after a majority of investors sided with the robotics ...
  10. Insights

    Large Chipotle Shareholders Get More Control (CMG)

    Chipotle shareholders voted on Wednesday to allow large, long-term shareholders more control over the board of directors. All board members were re-elected.
RELATED FAQS
  1. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
  2. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Answer >>
  3. What is the investor rights movement?

    The investor rights movement, also called shareholder activism, refers to the efforts of shareholders of publicly traded ... Read Answer >>
  4. How can investors influence the c-suite?

    Learn how investors can influence corporate management. Find out about methods that investors use to take control and some ... Read Answer >>
  5. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  6. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center