In a major decision issued last week, William Chandler of Delaware’s Court of Chancery ruled that corporate boards may use a “poison pill”—a device designed to block shareholders from considering a takeover bid—for as long a period of time as the board deems warranted. Because Delaware law governs most U.S. publicly traded firms, the decision is important—and it represents a setback for investors and capital markets. (Lucian Bebchuk: An Antidote for the Corporate Poison Pill – WSJ.com, 2/24/2011)
Lucian Bebchuk’s op-ed discusses the recent ruling by the Delaware courts that corporate boards may use a “poison pill” to block a takeover bid from being considered by shareholders for as long as the board deems warranted. The decision is a triumph for the poison pill and antitakeover defenses but represents a setback for investors and the capital markets.
The piece explains the substantial costs imposed on investors and the market for corporate control by the expansive freedom boards enjoy to block takeover bids. Bebchuk argues that institutional investors should seek to ensure that public firms self-commit not to block an offer favored by shareowners for too long by removing any classified boards in place. Doing so would produce considerable benefits for investors and capital markets.