According to a recent SSRN study, “rookie activist directors” – unseasoned independent directors appointed at the prompting of activists – add greater value to a company than other unseasoned independent directors. Here’s the abstract:
We examine the value-enhancing role of unseasoned independent directors nominated through shareholder activism events (Activist UIDs). Firms appointing Activist UIDs experience a larger value increase than those appointing Nonactivist UIDs, particularly when Activist UIDs have relevant experience, when they sit on the monitoring committees, and when their sponsors hold large target ownership.
Most of the companies in the study seem to have been small caps, and I think that needs to be taken into account when considering the study’s results. Established activist investors are likely to have access to a deeper and higher quality pool of director candidates than most small caps could find on their own.
-John Jenkins, TheCorporateCounsel.net May 16, 2019
