Further to our prior report and on the heels of a successful meeting with Nasdaq earlier this month, the Society filed a broadly supportive comment letter yesterday on Nasdaq's proposed golden leash disclosure rule in advance of the July 4th comment deadline.
Here is a key excerpt:
The
Society believes that all directors should be compensated for their
board service by the listed company in the same way. The practice by
some shareholder activists to compensate nominees or directors in
connection with their candidacy or service as a director on the listed
company (e.g., payment of an additional amount or bonus arrangements
based on an increase in the share price) could incentivize such
director(s) to make decisions that would generate a short-term share
price spike, but could be detrimental to or inconsistent with longer
term growth. These payments also could influence a director’s
independence in that such director would be “serving” the activist fund
in addition to the other shareholders, and it could give rise to
conflicts of interest affecting the director’s ability to carry out his
or her fiduciary duties to all shareholders. The Society believes
third-party payments to directors specifically for their board service
is a bad governance practice.
Based on input from its earlier online survey, Nasdaq informed us that it has decided not to pursue additional proposed rulemaking re: a prohibition on board service by "golden leash directors" or a standard deeming "golden leash directors" to be per se non-independent.