After taking a break this past proxy season, "golden
leash" arrangements are back in the spotlight. A few days ago,
Third Point LLC proposed so-called "golden leash"
arrangements for their two nominees to the board of Dow Chemical
"Golden leash" arrangements arise when a shareholder
activist privately offers to compensate its nominee directors in
connection with such nominees' service as a director of the
target corporation. Arrangements vary but include compensating
activist directors who are elected based on achieving benchmarks,
such as an increase in share price over a fixed term. Shareholder
activists only provide such incentives to elected activist
directors, not re-elected incumbent directors. See our prior
ISS's position, and the
Council of Institutional Investors' position.
Third Point is considering launching a proxy contest at
Dow's meeting next year. The nominee directors it proposed were
apparently rebuffed by Dow after months of negotiations. It is
rumoured, according to the Wall Street Journal, that negotiations over
board seats broke down in part because Third Point wanted to enter
into "golden leash" arrangements with its nominees.
Third Point's SEC filing discloses that its two
have received a cash payment from
Third Point equal to $250,000 in consideration for their agreement
to serve as nominees;
will receive a second cash payment
from Third Point equal to $250,000 in the event that the nominee is
appointed as a director, regardless of whether this occurs by
election or settlement;
have agreed to invest their second
payment of $250,000 in Dow shares if the nominee does not own at
least $250,000 of Dow shares at the time of such payment; and
may be entitled to two
additional cash payments from Third Point subject to Dow's
share price appreciating three years and five years after they join
the board – regardless of whether Third Point remains a
During the 2013 proxy season, Jana Partners LLC and Elliott
Management Corp. proposed "golden leash" arrangements for
their nominees to the boards of Agrium Inc. and Hess Corporation,
respectively. Jana was unsuccessful and Elliot settled its proxy
If Third Point launches a proxy contest against Dow's board,
only time will tell whether the third time's the charm for
shareholder activists who argue that "golden leash"
arrangements are an important tool to link director pay to target
company performance, which they say can benefit all investors.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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