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.

  1. Golden Hello

    A signing bonus offered to a candidate from a rival company. ...
  2. Golden Handcuffs

    A collection of financial incentives that are intended to encourage ...
  3. Golden Handshake

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

    A distinguishing symbol, mark, logo, name, word, sentence or ...
  5. Catalyst

    A catalyst in equity markets is a revelation or event that propels ...
  6. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
Related Articles
  1. Personal Finance

    How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  2. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  3. Options & Futures

    Pay Attention To The Proxy Statement

    Don't overlook this overview of a company's well-being.
  4. Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  5. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
  6. Economics

    What's a Horizontal Merger?

    A horizontal merger occurs when companies within the same industry merge.
  7. Investing

    A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  8. Economics

    3 Notorious American White Collar Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  9. Options & Futures

    The Top 4 Equity Proxies For the Futures Markets

    Futures markets have highly liquid equity proxies for nearly all major contracts, offering greater choices for traders and investors.
  10. Investing News

    Learn from These Big CEO Blunders

    A ceo can seem to have it all: power, influence and gravitas. But it can all erode — along with a company’s share price — in the wake of a scandal.
  1. How do proxy fights work?

    A proxy fight occurs when a group of shareholders in a particular company attempts to join together to effect change in ... Read Full Answer >>
  2. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  3. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  4. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  5. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  6. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center