When a Spin-Off is on the Board's Agenda

Director and Boards, Vol. 21, No. 2 (1997).

Posted: 14 Mar 1997

See all articles by Dennis C. Carey

Dennis C. Carey

Spencer Stuart

Charles M. Elson

University of Delaware - John L. Weinberg Center for Corporate Governance

Ralph S. Saul

Former Chairman & CEO, Cigna Corp.

Abstract

This article examines the rapidly escalating public company "spin-off" phenomenon. The authors challenge the conventional wisdom that such activity enhances shareholders value and suggests that it may sometimes have a non-corporate wealth enhancing purpose. Spin-offs may often be the result of a fee-driven investment banking environment or even the product of a chief executive seeking to further personal rather than corporate interests such as delaying a mandatory retirement or removing a potential rival from the organization. The authors thus argue that these spin-offs create a number of important corporate governance issues, the most significant of which, in addition to the fundamental question of whether to spin-off a division at all, is the governance structure of the newly spun-off operation. The new company's board structure, they argue, will be vital to assuring both the success of the new venture and the continued health of the parent organization.

JEL Classification: G34

Suggested Citation

Carey, Dennis C. and Elson, Charles M. and Saul, Ralph S., When a Spin-Off is on the Board's Agenda. Director and Boards, Vol. 21, No. 2 (1997)., Available at SSRN: https://ssrn.com/abstract=10362

Dennis C. Carey

Spencer Stuart ( email )

2005 Market St.
Suite 2350
Philadelphia, PA 19103
United States
215-814-1601 (Phone)
215-814-1682 (Fax)

Charles M. Elson (Contact Author)

University of Delaware - John L. Weinberg Center for Corporate Governance ( email )

Alfred Lerner Hall, Room 104
Newark, DE 19716
United States
302-831-6157 (Phone)

Ralph S. Saul

Former Chairman & CEO, Cigna Corp.

549 Avonwood Rd.
215-523-5051 (Phone)
215-523-5055 (Fax)

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