Career consequences of being a dissident director

This paper explores the career consequences of the decision to ally oneself with an activist investor/hedge fund in a proxy contest. We collected data from 13D statements and DEFC14A statements publicly available on the Securities and Exchange Commission website. Using 102 observations where an existing director reveals themselves to be a ‘dissident director’ (i.e. agrees to help an activist in a proxy contest against an unrelated firm), I find weak evidence over the 2011-2015 time period that such a decision results in negative career consequences, such as a loss of board seats or lower director compensation, using fixed effects in a regression framework (including individual fixed effects, year-director and firm fixed effects). Yet, over the earlier time period of 2006-2010, evidence persists of negative career consequences to the dissident director. The directors who suffer a loss in board seats over this period come from firms with high chief executive officer (CEO) ownership, more entrenched directors, and fewer women on the board. Similar results persist for CEOs/officers who reveal themselves to be dissident directors. Namely, officers and CEOs do not appear to suffer significant career consequences when deciding to join a campaign over the later time period. In total, these results have significant implications for the costs associated with governance reforms. If in previous time periods well established directors were hesitant to join an activist campaign because of the effect it may have on their career, these findings suggest that such a concern has now diminished. If established directors are less concerned with reprisal from other directors for joining a campaign this implies the costs associated with governance reform at the firm-level (via activist interventions) has decreased or diminished. In totality, the results highlight the changing cultural attitudes within the board to activist interventions.