Michal Barzuza

Interlocking Board Seats and Protection for Directors after Schoon

PUBLISHER
Harvard Law School Forum on Corporate Governance & Financial Regulation Blog
DATE
2014-01-13
 

Abstract

In a new paper, Interlocking Board Seats and Protection for Directors after Schoon, we examine how interlocking board seats propagated corporate governance change in the aftermath of a surprising change in law. We identify firms’ response to the Delaware case Schoon v. Troy Corp which permitted a board to alter indemnification arrangements for a former director retroactively. We find that interlocking outside directorships played a role in predicting whether firms changed their indemnification arrangements after Schoon. We also identify other covariates associated with responsiveness: (i) a large proportion of outside directors; (ii) a designated independent lead director, and (iii) more board meetings in executive session are all associated with increased probability of response. It is surprising that outside director interlocks should determine response when information about the case was widely available to the public at large and to in-house counsels in particular.

Citation

Michal Barzuza, Interlocking Board Seats and Protection for Directors after Schoon, Harvard Law School Forum on Corporate Governance & Financial Regulation Blog (January 13, 2014).
 

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