Corporate Practice Commentator has singled out a paper co-authored by Fordham Law professor Sean Griffith as one of the best corporate and securities articles of 2016, a distinction that Griffith also won last year.
The article, “How Corporate Governance is Made: The Case of the Golden Leash,” was selected from a field of 490 contenders. Griffith shares credit for the article with Matthew D. Cain of the U.S. Securities and Exchange Commission, Jill Fisch of the University of Pennsylvania Law School, and Steven Davidoff Solomon of the University of California Berkeley School of Law.
“’How Corporate Governance is Made’ is about offensive and defensive tactics used in proxy fights,” said Griffith. “It’s about how hedge fund activists pursue target companies and how those companies defend themselves.”
Griffith and his colleagues specifically analyzed the effects of corporate bylaw designed to defend against an activist tactic known as a golden leash. A golden leash describes a circumstance in which an activist investor offers financial incentives to their nominees to a company’s board. This controversial tactic often pits investors and corporate managers against one another, each claiming that the other is undermining shareholder value.
“How Corporate Governance is Made” concludes that preemptively defending against a golden leash often, but not always, damages a company’s stock price.
Griffith has continued to pursue this line of research, along with his Fordham University colleague Natalia Reisel. In their paper “Dead Hand Proxy Puts, Hedge Fund Activism, and the Cost of Capital,” Griffith and Reisel analyze the wider effects of a common provision in corporate debt agreements that protects creditors by triggering default in the event that an activist wins a proxy fight.
“Like the Golden Leash paper, our Dead Hand Proxy Puts paper addresses the larger question of contractual defenses to hedge fund activism,” said Griffith.
Griffith is the T.J. Maloney Chair in Business Law and the director of the Fordham Corporate Law Center. His primary teaching and research areas are corporations and mergers and acquisitions.