Separation Anxiety: The Impact of CEO Divorce on Shareholders

Separation Anxiety: The Impact of CEO Divorce on Shareholders

By
David F. Larcker, Allan McCall, Brian Tayan
Stanford Closer Look Series. October
2013

There are at least three potential ways in which a CEO divorce might impact a corporation and its shareholders:

  1. It might reduce the executive’s control or influence over the organization.
  2. It might affect his or her productivity, concentration, and energy levels.
  3. 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?