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. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
  5. Registered Holder

    Shareholders who hold their shares directly with a company.
  6. Duty Of Loyalty

    A director's responsibility to act at all times in the best interests ...
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

    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 a particular area of corporate governance within that company.Each individual ...
  6. Investing Basics

    Enterprise Resource Planning System: A How To

    An ERP system won’t transform poor management into good management, but the real-time business analytics can help make good management even better.
  7. Investing Basics

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
  8. Investing Basics

    Using Appreciative Inquiry To Solve Management Problems

    In its purest form, appreciative inquiry is a powerful tool for shifting the focus of an organization to something much greater than its bottom line - although the eventual outcome will often ...
  9. Investing Basics

    The Basics Of Value Chain Analysis

    Value chain analysis establishes an action plan to understand and implement actvities that create values to a firm's clients, resulting in firm profits.
  10. Investing Basics

    Top Tools for ERP Enterprise Resource Planning

    Top tools used in Enterprise Resource Planning with its characteristics - Explaining the main tools companies use when using Enterprise Resource Planning appraoch

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center