The Airgas situation demonstrates that continued investor engagement is needed in order to assert shareholder power in the hostile takeover setting. Popular perception holds that classified boards and poison pills are both in sharp decline, and there is some truth to this notion at large-cap US firms. However, nearly 90% of US firms have charter provisions that allow their boards to adopt a pill at any time, without shareholder approval. Classified boards, moreover, are far more common at smaller companies and recent IPOs than at established large-cap firms. For more on the implications of the Airgas/Air Products battle for US governance reform, see my report, available as a free download from the GovernanceMetrics online store.
The report concludes:
Shareholders, especially those with holdings outside the S&P 500, are left with one option if they wish to retain power in the hostile takeover setting: use the tools available, including proxy voting, shareholder proposals and “vote no” campaigns against directors, to work toward the elimination of the classiﬁed board.
Similar sentiments earlier this year at theRacetotheBottom [Delaware Validates “Just Say Never:” Air Products v. Airgas (The Need for Shareholder Access) (Part 3)]
Airgas in conjunction with Selectica and Yucaipa have as a practical matter mostly eliminated the market for corporate control. Without the market for corporate control, management becomes even more entrenched. These decisions, therefore, make it even more important that shareholders have a mechanism to remove directors who do not respond to shareholder interests. Cases like Airgas all but prove the need for shareholder access.