On this interpretation, the creation of a secret reserve at BSA was less an act of prudence than a means of empowering the directors, both to ward off criticism and to fund projects without attracting scrutiny from shareholders.
The secret reserve episode suggests that the BSA board acted largely as a self perpetuating oligarchy, to the extent that it took decisions which primarily satisfied itself.
We argue that the use of secret reserves was intended to extend directors' control over BSA's assets by preventing shareholders from monitoring the annual performance of the company.
Buckley, the presiding judge, endorsed the acceptability of internal or secret reserves.
The Directors' Defense: Rogers' case for the new policy on secret reserves was based on two arguments.
RESERVE Indicator variable that takes on a value one if the auction has a secret reserve price.
As a check for robustness of results to censoring associated with potential bidders avoiding auctions with secret reserves and high minimum bids, we estimated the models for the subsample of auctions with no reserve and a minimum opening bid less than the sample median of $25.
A less intrusive deterrent would be for auction houses to disclose the existence of a secret reserve
at the end of the bidding, rather than the beginning, which encourages bidders to bid the true market value of the piece or risk not getting it.