The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence and Policy

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Lucian Arye Bebchuk ; John C. Coates IV ; Guhan Subramanian (2002)
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    • jel: jel:G30 | jel:G34

Staggered boards, which a majority of public companies now have, provide a powerful antitakeover defense, stronger than is commonly recognized. They provide antitakeover protection both by (i) forcing any hostile bidder, no matter when it emerges, to wait at least one y... View more
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    BACKGROUND ...............................................................................................5 The Law of Staggered Boards .....................................................................5 The Proliferation of Staggered Boards .....................................................7 Justifications for Staggered Boards ..........................................................8 Nontakeover justifications. .....................................................................8 Antitakeover justifications....................................................................11 The Growing Opposition to Staggered Boards ......................................12 Conventional Wisdom on Staggered Boards..........................................14

    V. DID SHAREHOLDERS CONSENT?...................................................................57 A. A Brief History of Takeovers and Staggered Boards:...............................57 From Inco to Moran to Time ...........................................................................57 B. Assessing the Degree of Shareholder Consent .......................................60

    VI. IMPLICATIONS FOR TAKEOVER LAW...........................................................62 A. Redeeming Pills Following Defeat in One Election...............................62 1. Consistency with fundamental principles of Delaware case law..........63 2. Legislative intervention not required. ..................................................65 3. Substantial consequences with minimal disruption.............................65 B. The Permissibility of Opt-Out ...............................................................66

    Figure 1: Staggered Board Incidence by Industry............................................7

    Figure 2: SB Incidence by Firm Size ...................................................................8

    Figure 3: Bid Outcomes in the Short-run.........................................................46

    Figure 4: Bid Outcomes in the Long-run.........................................................49

    Figure 5: Staggered Board Incidence by Era...................................................59

    Table 1: Delay Imposed by Various Target Defenses (In Years)..................33

    Table 2: Summary Data on Hostile Bid and Target Characteristics ............42

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