Separation Anxiety: The Impact of CEO Divorce on Shareholders (CGRP-36)
Authors: Professor David F. Larcker, Stanford Graduate School of Business, Allan McCall, PhD 2013 and Brian Tayan, MBA 2003, Researchers, Center for Leadership Development and Research, Stanford GSB.
Publishing Date: October 1, 2013
There are at least three potential ways in which a CEO divorce might impact a corporation and its shareholders. First, it might reduce the executive’s control or influence over the organization. Second, it might affect his or her productivity, concentration, and energy levels. Third, it can influence attitudes toward risk. We examine these in detail, and ask:
· Should shareholders and boards be concerned when a CEO and spouse separate?
· Should the board make the CEO “whole” in order to restore equity incentives to where they were prior to divorce?
· Is divorce a private matter, or should companies disclose this information to shareholders?
Read the attached Closer Look and let us know what you think!
Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.
The entire Closer Look series may be found here.