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Abstract:
One of the goals of the corporate governance movement has been to replace the current procedurally based duty of care with an equity-based model. For such an approach to be viable, a linkage between better director management monitoring and heightened board equity ownership must be demonstrated. This Article finds such a linkage empirically. The authors report that based on an examination of a substantial number of public companies, the greater the dollar value of the outside director equity ownership: (i) the better the company?s overall performance, and (ii) the more likely in a poorly performing company that there will be a disciplinary-type CEO turnover.

Abstract:
This article examines the rapidly escalating public company "spin-off" phenomenon. The authors challenge the conventional wisdom that such activity enhances shareholders value and suggests that it may sometimes have a non-corporate wealth enhancing purpose. Spin-offs may often be the result of a fee-driven investment banking environment or even the product of a chief executive seeking to further personal rather than corporate interests such as delaying a mandatory retirement or removing a potential rival from the organization. The authors thus argue that these spin-offs create a number of important corporate governance issues, the most significant of which, in addition to the fundamental question of whether to spin-off a division at all, is the governance structure of the newly spun-off operation. The new company's board structure, they argue, will be vital to assuring both the success of the new venture and the continued health of the parent organization.