The Consequences to Directors for Deploying Poison Pills

60 Pages Posted: 27 Sep 2019 Last revised: 17 Oct 2023

See all articles by William C. Johnson

William C. Johnson

University of Massachusetts Lowell - The Robert J. Manning School of Business

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business; European Corporate Governance Institute (ECGI)

Michael D. Wittry

Ohio State University (OSU) - Department of Finance

Date Written: May 25, 2023

Abstract

Non-executive directors associated with poison pill adoption experience a decrease in shareholder votes, an increase in termination rates across all their directorships, and a decrease in the likelihood of new board appointments. These consequences are not due to poor firm performance, active bid resistance, or hedge fund activism, and accrue especially among young directors and when the adopted pill is relatively costly to the firm. Firms have positive stock price reactions when pill-associated directors die unexpectedly, compared to negative returns for other directors. We conclude that pill-adopting directors experience a decrease in the value of their services.

Keywords: poison pills, director reputation, director turnover, director labor market

JEL Classification: G34, K22, L51

Suggested Citation

Johnson, William C. and Karpoff, Jonathan M. and Wittry, Michael D., The Consequences to Directors for Deploying Poison Pills (May 25, 2023). Fisher College of Business Working Paper No. 2019-03-023, Charles A. Dice Center Working Paper No. 2019-23, European Corporate Governance Institute – Finance Working Paper No. 918/2023, Available at SSRN: https://ssrn.com/abstract=3460201 or http://dx.doi.org/10.2139/ssrn.3460201

William C. Johnson

University of Massachusetts Lowell - The Robert J. Manning School of Business ( email )

One University Avenue
Lowell, MA 01854
United States

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michael D. Wittry (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

854 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-3217 (Phone)

HOME PAGE: http://fisher.osu.edu/people/wittry.2

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