Why Do Managers Dismantle Staggered Boards?

80 Pages Posted: 15 Jun 2006  

Mira Ganor

University of Texas at Austin - School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: June 12, 2006

Abstract

Staggered boards offer incumbent management considerable protection from hostile takeovers and proxy fights. However, in the last few years, managers of an increasing number of firms have voluntarily destaggered their boards, exposing themselves to the risk of being removed from office. This paper investigates why managers decide to destagger their boards. I find statistically significant evidence that the likelihood of destaggering increases with shareholder pressure (in the form of precatory shareholder resolutions seeking destaggered boards) and with the amount of the CEO's unvested (including out-of-the-money) options. I do not find evidence of a strong connection between the decision to destagger and firm performance, or other CEO characteristics, including other forms of compensation such as unrestricted equity. The study provides insight into the informal power and influence of shareholders over the board, and the role of equity and monetary compensation in aligning management's interests with those of the shareholders.

Keywords: Staggered boards, Corporate governance, Agency costs, Boards, Directors, Takeovers, Antitakeover, Compensation, Regression, Options

JEL Classification: G30, G34, K22

Suggested Citation

Ganor, Mira, Why Do Managers Dismantle Staggered Boards? (June 12, 2006). Available at SSRN: https://ssrn.com/abstract=908668 or http://dx.doi.org/10.2139/ssrn.908668

Mira Ganor (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

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