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  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