As "member substitution"-styled M&A transactions proliferate in health care, greater consideration is warranted on the most effective use of board and committee seats as "currency" for such transactions.
There is no "set" number of board (or committee) seats that must be applied in extending governance input by the "acquiring party" to the "acquired party." The general concept is a number that is sufficient to guarantee a "voice" in board and committee processes. To that extent, 49 percent or similarly high (but less than 50 percent) levels are not usually necessary to provide the necessary vehicle for input. Smaller percentages are often buttressed by the addition of special powers (e.g., supermajority voting rights, with respect to certain agenda items).
A recent article in The Wall Street Journal on the control-related approach taken by activist investors serves to extend the "board seat currency" discussion, to control of key committees. As the article points out, in certain situations obtaining control or significant influence on certain key board committees may provide particularly strong levels of organizational influence.
Most prominent among those committees would be (i) the executive compensation committee (with the related impact of direct connection to the chief executive officer); (ii) the finance committee (with its control over capital projects and related commitments); (iii) the strategic planning committee (with its influence on the long-term strategic mission of the organization); and (iv) the executive search and succession committee (with its involvement in CEO recruitment and retention).
In this context, "control" could be manifested by commitments of the "acquiring party" to extend committee chairmanship for a set period of time to a representative of the "acquired party." The broader point is that the consideration of governance commitments as consideration in member substitution or similar transactions may wish to focus less on sheer numbers of board seats, and more on the power associated with such seats.
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