This would explain why staggered boards and incorporation in states with more anti-takeover statutes can deter future activist interventions, while the poison pill, surprisingly, does not.
We find that the likelihood of these interventions is substantially lower for firms that (i) are incorporated in a managerial-friendly state with more anti-takeover statutes, or (ii) have adopted a staggered board, as long as the firm is also incorporated in a managerial-friendly state.
THE PILL'S INGREDIENTS The Mechanics of the Pill The Judicial Response IV ADAPTIVE RESPONSES TO THE PILL Corporate Governance Responses Strategic Responses Activist Investors and Shareholder Rights By-Laws Anti-Takeover Statutes Modifications to Poison Pills V WHY CANADA IS DIFFERENT Canadian Securities Regulatory Framework Structure of Canadian Capital Markets Duties of Directors in Canada Canadian Regulatory Philosophy Canadian Poison Pill Jurisprudence Suggestions For the Future VI CONCLUSION I INTRODUCTION
I will then examine the impact of anti-takeover statutes. Finally, I will survey some modified versions of poison pills--"dead hand" pills and "no hand" pills--which have emerged since the introduction of the poison pill.
State Anti-Takeover Statutes. Since the passage of the Williams Act in 1968, many states have adopted anti-takeover laws specifically regulating tender offers.
The American system of takeover regulation is a combination of federal statutes and regulations, state anti-takeover statutes and state fiduciary duty concepts.
Compared to most states, which have adopted multiple anti-takeover statutes of ever-increasing ferocity, Delaware's single takeover statute is relatively friendly to hostile bidders.
In a series of articles, Lucian Bebchuk and his co-authors point out that state takeover regulation demonstrably reduces shareholder wealth but that most states have nevertheless adopted anti-takeover statutes. Even many advocates of the race-to-the-top hypothesis concede that state regulation of corporate takeovers appears to be an exception to the rule that efficient solutions tend to win out.
"These concerns have reinforced the calls of those seeking to restrict hostile takeovers by, for example, anti-takeover statutes
in some American states and proposals for shareholder ratings changes in the UK.
Although proxy contests (also called proxy battles, fights, and wars) were infrequently used as a means of gaining control of publicly traded corporations or of influencing management policy decisions during the 1980s, recent changes in the United States business environment -- the limited availability of financing for corporate takeovers, the collapse of the junk bond market, the passage of anti-takeover statutes
in 40 states and proliferation of anti-takeover defense tactics, and the active role institutional investors are now taking in the governance of American corporations -- the proxy contest has now become a very important and leading tool in battles for corporate influence and control.
While merger and acquisition activity should continue at a somewhat reduced level, proxy contests, which are fertile ground for mismanagement charges, are expected to multiply Virtually all proxy fights spawn associated lawsuits, challenging either the proxy process itself or state anti-takeover statutes
. Sometimes they occur later because of the charged atmosphere of allegations created by these struggles.
State anti-takeover legislation has drawn opposition from free-market economists, regulatory officials, constitutional theorist who argue that state anti-takeover statutes
violate the commerce clause of the constitution, and those interested in buying companies.