The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants
Lucian A. Bebchuk
Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
John C. Coates, IV
Harvard Law School
Harvard Business School
Stanford Law Review, Vol. 55, pp. 885-917, 2002
Harvard Law and Economics Discussion Paper No. 393
This paper develops and defends our earlier analysis of the powerful antitakeover force of staggered boards. We reply to five responses to our work, by Stephen Bainbridge, Mark Gordon, Patrick McGurn, Leo Strine, and Lynn Stout, which are to be published in a Stanford Law Review Symposium. We present new empirical evidence that extends our earlier findings, confirms our conclusions, and demonstrates that the alternative theories put forward by some commentators do not adequately explain the evidence. Among other things, we find that having a majority of independent directors does not address the concern that defensive tactics might be abused. We also find that effective staggered boards do not appear to have a significant beneficial effect on premia in negotiated transactions. Finally, we show that, unlike our approach, the approach that our critics advocate for Delaware takeover jurisprudence to follow is both inconsistent with its established principles and takes an extreme position in the overall debate on takeover defenses. Our analysis and new findings further strengthen the case for limiting the ability of incumbents armed with a staggered board to continue saying no after losing an election conducted over an acquisition offer.
Our earlier study, Lucian Bebchuk, John Coates IV and Guhan Subramanian, "The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy," 54 Stanford Law Review 887-951 (2002), is available on the SSRN site at http://ssrn.com/abstract=304388.
Number of Pages in PDF File: 31
Keywords: Takeover, mergers and acquisitions, tender offers, takeover bids, defensive tactics, staggered boards, poison pills, premia, independent directors
Date posted: December 10, 2002 ; Last revised: April 29, 2009