Entrenched Management’s Favorite Weapon
Imagine a political maneuver that allowed an embattled state governor — facing widespread voter disapproval and imminent defeat at the polls — to magically conjure millions of additional votes to give to his or her political allies and supporters.
Exactly how long do you suppose such a flagrant legal abuse artifice would withstand constitutional challenge?
Dubious Defensive Tactic
In the case of corporate “poison pills” — popularized in the 1980’s and an entrenched part of corporate takeover defenses ever since — the answer, amazingly, is “going on four(!) decades.”
Now that the Roberts Supreme Court has deemed it wise to go back all the way to 1965 to upend that year’s Voting Rights Act, it should tackle a truly egregious legal abuse of more recent vintage.
Namely, it should invalidate corporate poison pills (also euphemistically known as “shareholder rights plans” — an Orwellian term if there ever was one).
The practice allows incumbent management to issue discounted shares to existing shareholders, diluting (and therefore thwarting) would-be acquirers.
And how does an acquirer get a company to revoke its poison pill?
By negotiating a sufficiently high (exorbitant?) purchase price with the company’s board while lavishing severance payments on exiting management.
The latter are also known as “golden” or “platinum” parachutes — another euphemism.
My preferred terms(s): “white-collar extortion”; “executive suite ransom,” etc.
