Certain activist shareholders involved in proxy contests have offered special compensation (e.g., a fee for agreeing to be nominated on the activist’s slate or performance-related bonuses after election) to their director nominees. Activists state a desire to compensate nominees who commit time and risk a public proxy fight, but such arrangements call into question who the dissident director nominee is really representing — all the target company’s shareholders or just the activist. Indeed, it is this very concern that results in unaffiliated nominees of activists being more likely to be elected than employees of activist firms.

Leading commentators have criticized special compensation arrangements with dissident director nominees as...