Presentation on theme: "1 Activism and the Shift to Annual Director Elections Discussant: I-Ju Chen ( 陳一如 ), Yuan-Ze University, Taiwan 2012 National Taiwan University International."— Presentation transcript:
1 Activism and the Shift to Annual Director Elections Discussant: I-Ju Chen ( 陳一如 ), Yuan-Ze University, Taiwan 2012 National Taiwan University International Conference on Finance, 2012/12/07
2 Summary of this study The authors argue that the staggered board is one of most prominent takeover defenses. Many studies indicate that staggered boards destroy shareholder value (Bebchuk et al., 2002; Bebchuk and Cohen, 2005; Daines, 2001; Faleye, 2007; Guo et al., 2008; and Bebchuk et al., 2011). Moving away from staggered boards in favor of unitary boards is one way to empower shareholders. However, few studies focus on the role of shareholder activism play in the decision to de-stagger the board and the speed of the adjustment of the election of board directors. This study aims to answer this question.
3 Summary of this study The authors collect data on the incidence of shareholder activism at the de-staggering firms. They find that non-binding shareholder proposals have substantial influence on target firms. However, when they consider the speed of eventually moving to annual director elections, proposals preceded by activist hedge funds tend to lead an immediate switch to annual election.
4 Contributions of this study Investigate the different effect on the board structure from different shareholders proposals and highlight the importance of activist hedge funds investors to improve the governance structure and increase shareholders’ value.
5 Advantages clear message Effect of de-staggering board vs. Role of shareholder activisms to de-stagger the board The writing is fluent and concise. Complement to the governance literature
6 It seems that the variable definitions are not clear in several cases. For example, The classification about the monitoring is unclear (from Table 1, Panel E) ? How do the authors define “shareholder proposals”? “Activist target” “Investment based 13d filing” and “Any of above”? Is it correct that the summation of “shareholder proposals”, “Activist target”, and “Investment based 13d filing” equal to “Any of above”? Suggestions
7 Similar questions in Panel A of Table 2: Table 2 (panel A) shows the implementation decision may differ if the proposals preceded by different shareholder activism. In the Table, it is unclear what is “activist event”? What is “Boilerplate 13D”? And what is “any 13D filing”? Is the summation of “Activist event” and “Boilerplate 13D” equal to “Any 13D filing”? If yes, the adding number is not perfectly matched to that row; if not, what is missed in calculation of sample of activism. Suggestions
8 What are the effect of other activist shareholders? We may all agree that non-binding shareholder proposals push less pressure on managers to immediately implement the decision to de- stagger as the author find that more than half of cases are dragged out the process through year 3. On the other hand, if the shareholders proposals are proposed by activist hedge funds, 37.2% of firms choose to immediate allow the entire board to be elected as Table 2 indicates.
9 Suggestions As literature suggests (ex: Smith, 1996; Cremers and Nair, 2005), institutional investors or investment fund such as pension fund also play an important role of governance. It seems that in this study the author focuses on the effect of activist hedge funds, but how about the other activist shareholders?
10 The average years to elect entire board significantly increase from 1.2 years to 2.2 years during 2003 to 2010. More than 30% of firms elect the entire board in the proposal year in 2003, however the percentage decreases as time passes. If board de- staggering is one way to efficiently govern the firm, the trend is contrary to what we expect. Figure 2: Time series breakdown that shareholders are able to vote for entire board; Year 0= immediate, Year +3= delayed phased Why would it happen? Could the authors provide some explanations?
11 Regarding to the model specification of Table 5 : The authors use the above specification to test the effect of different forms of activisms on the target firms which are eventually acquired with 2 years. It is suggest to add crisis as another independent variable in the specification. Suggestions crisis