Separation Anxiety: The Impact of CEO Divorce on Shareholders

6 Pages Posted: 28 Sep 2013

See all articles by David F. Larcker

David F. Larcker

Stanford University - Graduate School of Business; European Corporate Governance Institute (ECGI); Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance

Allan L. McCall

Stanford University - Graduate School of Business

Brian Tayan

Stanford University - Graduate School of Business

Date Written: October 1, 2013

Abstract

There are at least three potential ways in which a CEO divorce might impact a corporation and its shareholders. First, it might reduce the executive’s control or influence over the organization. Second, it might affect his or her productivity, concentration, and energy levels. Third, it can influence attitudes toward risk.

We examine these in detail, and ask: Should shareholders and boards be concerned when a CEO and spouse separate? Should the board make the CEO “whole” in order to restore equity incentives to where they were prior to divorce? Is divorce a private matter, or should companies disclose this information to shareholders?

Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.

Keywords: CEO divorce, executive divorce, disclosure, transparency

JEL Classification: G3, G30, J12, M10

Suggested Citation

Larcker, David F. and McCall, Allan L. and Tayan, Brian, Separation Anxiety: The Impact of CEO Divorce on Shareholders (October 1, 2013). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance and Leadership No. CGRP-36, Available at SSRN: https://ssrn.com/abstract=2331605

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
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650-725-6159 (Phone)

European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels
Belgium

Stanford University - Arthur & Toni Rembe Rock Center for Corporate Governance ( email )

Crown Quadrangle 559 Nathan Ab
Stanford, CA 94305-8610
United States

Allan L. McCall

Stanford University - Graduate School of Business ( email )

Stanford, CA 94305
United States

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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