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INTRODUCTION Stakeholder governance is now at the center of a fundamental and heated debate in corporate law and public policy. (1) Supporters of stakeholder governance (which we refer to by [...], Amid growing concerns for the effects that corporations have on stakeholders, supporters of stakeholder governance advocate relying on corporate leaders to use their discretion to protect stakeholders, and they seem to take corporate pledges to do so at face value. By contrast, critics question whether corporate leaders have incentives to protect stakeholders and to follow through on pledges to do so. We provide empirical evidence that can contribute to resolving the debate between these rival views. The most celebrated pledge by corporate leaders to protect stakeholders was the Business Roundtable's 2019 Statement on the Purpose of a Corporation (the "BRT Statement"). The BRT Statement expressed a commitment to deliver value to all stakeholders, not just shareholders, and was widely viewed as a major milestone that would usher in "stakeholder capitalism" and significantly improve the treatment of stakeholders. If any companies could be expected to follow through on stakeholder rhetoric, those whose CEOs signed the highly visible BRT Statement would be natural candidates to do so. We review a wide array of hand-collected corporate documents of the 128 U.S. public companies that joined the BRT Statement (the "BRT Companies"). Examining the two-year period following the issuance of the BRT Statement, we obtain the following six findings: First, the numerous BRT Companies that updated their corporate governance guidelines during the two-year period generally did not add any language that improves the status of stakeholders and, indeed, most of them chose to retain a commitment to shareholder primacy in their guidelines. Second, as of the end of the two-year period, most of the BRT Companies had governance guidelines that reflected a shareholder primacy approach. Third, in SEC submissions or securities filings responding to the over forty shareholder proposals that were submitted to BRT Companies regarding their implementation of the BRT Statement, most of the BRT Companies explicitly stated that their joining the BRT Statement did not require any such changes, and none of them accepted that the Statement required any changes. Fourth, all of the BRT Companies had and retained corporate bylaws that reflect a shareholder-centered view. Fifth, in their proxy statements following the BRT Statement, the great majority of the BRT Companies did not even mention their joining the BRT Statement, and, among the minority of companies that did mention it, none indicated that their endorsement required or was expected to result in any changes in stakeholder treatment. Sixth, the BRT Companies all continued to pay directors compensation that strongly aligns their interests with shareholder value and avoided any use or support of stakeholder-oriented metrics. Overall, our findings support the view that the BRT Statement was mostly for show and that BRT Companies joining it did not intend or expect it to bring about any material changes in how they treat stakeholders. Introduction 1034 I. The Question and the Stakes 1038 A. A Reorientation of Corporate Purpose 1038 B. An Alternative Hypothesis and a Question 1042 C. The Stakes 1043 II. Corporate Governance Guidelines 1047 A. Companies that Amended Their Guidelines 1049 B. The BRT Board Sample 1052 C. Large Companies 1058 D. Other Companies 1062 III. Reactions to Shareholder Proposals 1064 A. The Proposals B. Requests for SEC No-Action Letters 1066 C. Statements in Opposition to Proposals 1070 IV. Bylaws and Proxy Statements 1073 A. Bylaws B. Proxy Statements 1076 V. Director Compensation 1077 A. Principles of Director Compensation 1078 B. Actual Director Compensation 1083 Conclusions 1086 Appendix 1087

Despite growing empirical evidence on the effectiveness of dialogue between activists and corporations in stakeholder engagement, scholars have not fully accounted for the mechanisms that explain its success. We address this gap by leveraging Habermas's theory of communicative action. In our longitudinal qualitative study, we explore the dialogue on climate change between the Interfaith Centre for Corporate Responsibility, a coalition of faith-based investors, Ford, and General Motors. We find that communicative action can emerge from strategic action as a result of three cycles of interaction: establishing dialogue, framing, and deliberation. Our study contributes to the literature on shareholder engagement by integrating communicative and strategic action, thereby offering a new interpretation of how reputational threat and dialogue come together to produce a common ground between activists and companies. Funding: The authors gratefully acknowledge funding from the European Research Council under the European Union's Seventh Framework Programme [ERC-2010-StG 263604-SRITECH]. Keywords: social responsibility * sustainability/corporate environmentalism * corporate governance * qualitative research, Introduction Existing research has established the numerous advantages that result from dialogue and collaboration between corporations and stakeholders (Proffitt and Spicer 2006, Bartley 2007, Scherer and Palazzo 2007, Van Buren [...]

This paper investigates the role of institutional trading in the emergence of hedge fund activism--an important corporate governance mechanism. We demonstrate that institutional sales raise a firm's probability of becoming an activist target. Furthermore, by exploiting the funding circumstances of individual institutions, we establish that such effects occur through a liquidity channel, i.e., the activist camouflages his purchases among other institutions' liquidity sales. Additional evidence supports our conclusion. First, activist purchases closely track institutional sales at the daily frequency. Second, such synchronicity is stronger among targets with lower expected monitoring benefits, suggesting that gains from trading with other institutions supplement these benefits in the activist's targeting decision. Finally, we find that institutional sales accelerate the timing of a campaign at firms already followed by activists rather than attract attention to unlikely targets. Taken together, our findings offer a novel empirical perspective on the liquidity theories of activism; while activists screen firms on the basis of fundamentals, they pick specific targets at a particular time by exploiting institutional liquidity shocks. History: Accepted by Amit Seru, finance. Supplemental Material: The Internet appendix is available at https://doi.org/10.1287/mnsc.2016.2654. Keywords: shareholder activism * corporate governance * institutional investors * hedge funds, 1. Introduction Hedge fund activism is an important governance mechanism associated with significant improvements in the performance and governance of targeted firms (see Brav et al. 2008, 2015; Becht et [...]

The executive suite and the board are closely bound to each other through their fiduciary responsibility to the same shareholders. With chief executive officers' (CEOs) prominent role in both governing bodies, their independence from CEOs' self- serving behavior might be related to each other. We explore the interdependence using an external shock increasing board independence. The shock weakens executive suite independence by increasing CEO connectedness within executive suites through appointments and preexisting social ties. We also uncover interesting dynamics between the two governing bodies: (1) the spillover does not occur when treated firms increase CEO- independent director social ties, suggesting CEO-executive connections and CEO-director connections are substitutes; (2) consistent with theories of board independence, when an information environment calls for dependent boards, increasing CEO-executive connections, which helps negate the shock effect on the board, has positive marginal effects on Arm performance. Our findings are not driven by the Sarbanes-Oxley Act and are robust to a battery of other tests. We conclude that independence in the board and executive suite are inversely related; inferring the overall independence from board independence alone can be highly misleading. History: Accepted by Amit Seru, finance. Funding: The authors acknowledge financial support from the Mitsui Life Financial Research Center at the University of Michigan, the National Natural Science Foundation of China [Project 71202020], and the Independent Research Program of Tsinghua University [Project 2015THZWYY09], Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2016.2603. Keywords: C-suite * CEO connectedness in executive suites * CEO-independent director social ties * independent board requirement * corporate governance * information environment, 1. Introduction Corporations have two main governing bodies: the board of directors and the executive suite of the chief executive officer (CEO) and her top lieutenants. Numerous papers are devoted [...]

III. EMPIRICAL ANALYSIS The saga of the golden leash, the Wachtell Bylaw, and the ISS recommendation presents a natural experiment to test how investors value corporate governance. We begin, in [...]

This Article presents a case study of a corporate governance innovation: the incentive compensation arrangement for activist-nominated director candidates colloquially known as the "golden leash." Golden leash compensation arrangements are [...]