Golden Leash

AAA

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. 

INVESTOPEDIA EXPLAINS '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. Golden Handcuffs

    A collection of financial incentives that are intended to encourage ...
  2. Golden Hello

    A signing bonus offered to a candidate from a rival company. ...
  3. Golden Handshake

    A stipulation in an employment agreement which states that the ...
  4. Strategic Management

    The management of an organization’s resources in order to achieve ...
  5. Performance Management

    The management of employees, departments, and organizations to ...
  6. Social Enterprise

    An organization that is directly involved in the sale of goods ...
Related Articles
  1. How To Become A Corporate Board Member ...
    Personal Finance

    How To Become A Corporate Board Member ...

  2. Evaluating The Board Of Directors
    Insurance

    Evaluating The Board Of Directors

  3. Pay Attention To The Proxy Statement
    Options & Futures

    Pay Attention To The Proxy Statement

  4. Proxy Voting Gives Fund Shareholders ...
    Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center