Case | HBS Case Collection | July 2016

'Golden Leash' Pay for Directors at The Dow Chemical Company

by Ian Gow, Suraj Srinivasan and Neeraj Goyal


In November 2014, The Dow Chemical Company was faced with the prospect of a proxy battle with prominent hedge fund and activist investor Third Point Management. The activist had criticized Dow’s recent performance and advocated that the company split itself to maximize its potential. The activist also proposed two director candidates to join Dow’s board. Third Point offered its director nominees what had come to be known as a “golden leash” incentive structure—a significant amount of incentive payment from the investor if the company performed well. Supporters and critics had weighed in on the pros and cons of such incentive schemes for corporate independent directors. Faced with the prospect of a proxy fight, Dow’s board had to decide whether to invite the two directors to join the company’s board knowing they came with the special payment scheme from the hedge fund.

Keywords: Motivation and Incentives; Governing and Advisory Boards; Executive Compensation; Investment Activism; Chemical Industry;


Gow, Ian, Suraj Srinivasan, and Neeraj Goyal. "'Golden Leash' Pay for Directors at The Dow Chemical Company." Harvard Business School Case 117-029, July 2016.