US ISS outlines the future of poison pills

Author: | Published: 30 Nov 2012
The Delaware Supreme Court ruled in 1985 that a board of directors could adopt preferred share purchase rights plans, so-called poison pills, as a takeover defence mechanism. Patrick McGurn, special counsel at Institutional Shareholder Services (ISS) says it was no coincidence that ISS was launched that same year

Shareholder rights plans are often understood as anything but. By giving shareholders the opportunity to dilute a potential owner's stake in a company, they have effectively deterred any and all hostile acquisitions of companies that have adopted them.

Takeover defence mechanisms like shareholder rights plans, especially those accompanied by classified boards, have declined in recent years, and pro-shareholder policies have risen. A lot of the trend is thought to be a result of proxy advisory firms like ISS.

"I'd say defences continued to go up and then stabilised in the first decade after Moran, then they went down over the course of the...