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ARTICLE · 29 APRIL 2015

"Golden Leash" Arrangements Secure ISS’s Cautious Nod

McCarthy Tétrault
McCarthy Tétrault
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After taking a break last proxy season, "golden leash" arrangements are back in the spotlight.

CanadaCorporate/Commercial Law
Shane D'Souza
Shane D'Souza
Deandra L. Schubert
Deandra L. Schubert
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After taking a break last proxy season, "golden leash" arrangements are back in the spotlight. A few days ago, Institutional Shareholder Services Inc. ("ISS") gave "cautious support" to so-called "golden leash" arrangements between Third Point LLC and its two nominees to the board of Dow Chemical Co.

As background, "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 articles for more background, ISS's position, and the Council of Institutional Investors' position.

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