Activist investors and implications for corporate governance: A case study of Barington Capital Group and L Brands

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Abstract

The key research question of this paper is to explore the implications for both financial and corporate governance performances from the emergence of activist investors. This paper uses a dramatic case study of one specific activist investor’s role, Barington Capital Group, in analyzing the performance of a public company, L Brands, which lost $20 billion in market capitalization in the last three years while the U.S. stock market was going up significantly. In conclusion, this activist investor’s approach and recommendations in this case study could be used as operational guidelines by boards of directors and corporate executives for improving both their financial and corporate governance performances. From its financial analysis, Barington recommended either an initial public offering of the superior performing Bath & Body Works brand or a spinoff of the weak performing Victoria’s Secret brand. From its corporate governance analysis, Barington recommended that L Brands improve the composition of its board of directors whose deficiencies in director independence, industry experience, and diversity have hindered its ability to effectively oversee and advise management. Accordingly, the major sections of this paper are financial analysis, operational zeitgeist brand analysis, and corporate governance analysis. It is important to note that this paper was prepared exclusively with public information.

Keywords: Activist Investors, Zeitgeist, Corporate Governance, Barington, L Brands

Authors’ individual contribution: Conceptualization – H.G. and M.C.; Methodology – H.G.; Resources – M.C.; Writing – Original Draft – H.G.; Writing – Review & Editing – M.C.; Visualization – M.C.; Funding Acquisition – M.C.

JEL Classification: G3, G30

Received: 25.04.2019
Accepted: 18.06.2019
Published online: 02.07.2019

How to cite this paper: Grove, H., & Clouse, M. (2019). Activist investors and implications for corporate governance: A case study of Barington Capital Group and L Brands. Corporate Board: Role, Duties and Composition, 15(2), 28-36. https://doi.org/10.22495/cbv15i2art3