The Career Consequences of Being a Dissident Director

Abstract

This paper explores the career consequences of the decision to ally oneself with an activist investor/hedge fund in a proxy contest. Using 102 observations where an existing director reveals themselves to be a ‘dissident director’ (i.e. agrees to help an activist in a proxy contest against an unrelated firm), I find weak evidence over the 2011-2015 time period that such a decision results in a loss of board seats or lower director compensation. Yet, over the earlier time period of 2006-2010, evidence persists of negative career consequences to the dissident director. The directors who suffer a loss in board seats over this period come from firms with high CEO ownership, more entrenched directors, and fewer women on the board. Similar results persist for CEOs/officers who reveal themselves to be dissident directors. In total the results highlight the changing cultural attitudes within the board to activist interventions and yield strong implications for the costs associated with firm-level governance reform.

Keywords: hedge fund activism, boards

JEL Classification: G30, G34