The Board-Room Where It Happens—A Research Note

Activist investors often run “short-slate” proxy contests, seeking representation short of a majority on a corporation’s board of directors. Do activists pursue short-slate representation because they want to be an instrumental part of a corporation’s governance, or because success in a short-slate contest sends a signal to incumbent management to reform, lest there be a future proxy contest for control of the corporation? Event study evidence from “the largest proxy battle ever” suggests that a single board seat is instrumentally valuable, exclusive of signaling effects. In 2017, activist hedge fund Trian Management vied with the management of Procter & Gamble (P&G) over a single seat on P&G’s board of directors. In a razor-thin contest, first P&G and then Trian was declared the winner. P&G’s market value rose significantly on news raising the likelihood of Trian representation on the board and fell significantly with news favoring P&G incumbent management. Since the identity of the winner had important implications for the P&G board’s composition but added almost no signal about Trian’s ability to gain control of P&G in the future, these results offer evidence that minority board representation directly yields value for activists.