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Aswath damodaran 63 the counter reacion 64

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Unformatted text preview: o hold liCle or no stock in the firm In other words, the best defense against a hosIle takeover is to run your firm well and earn good returns for your stockholders ¨༊  Conversely, when you do not allow hosIle takeovers, this is the firm that you are most likely protecIng (and not a well run or well managed firm) ¨༊  Aswath Damodaran 52 In response, boards are becoming more independent… 53 ¨༊  ¨༊  ¨༊  ¨༊  Boards have become smaller over Ime. The median size of a board of directors has decreased from 16 to 20 in the 1970s to between 9 and 11 in 1998. The smaller boards are less unwieldy and more effecIve than the larger boards. There are fewer insiders on the board. In contrast to the 6 or more insiders that many boards had in the 1970s, only two directors in most boards in 1998 were insiders. Directors are increasingly compensated with stock and opIons in the company, instead of cash. In 1973, only 4% of directors received compensaIon in the form of stock or opIons, whereas 78% did so in 1998. More directors are idenIfied and selected by a nominaIng commiCee rather than being chosen by the CEO of the firm. In 1998, 75% of boards had nominaIng commiCees; the comparable staIsIc in 1973 was 2%. Aswath Damodaran 53 Disney: Eisner’s rise & fall from grace ¨༊  ¨༊  ¨...
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