Crisis Poison Pills

We show that a large number of firms adopt poison pills during periods of market turmoil. Specifically, during the coronavirus pandemic, many firms adopted poison pills following declines in valuations, and stock prices increased upon the announcement of firms’ poison pill adoption. Stock price increases are driven by (1) firms in which activist shareholders acquire ownership stakes and (2) firms in industries that had high exposure to the crisis. Likewise, we find a positive reaction to pills with provisions directed at stalling activists’ interventions. Our results suggest that crisis pills that target potentially disruptive ownership changes may benefit current shareholders.

Shareholders and Takeover Bids: Revisiting the Poison Pill

This chapter assesses change-of-control transactions and the use of the defensive tactic known as the poison pill, a governance tool that often puts boards, rather than shareholders, in charge of a corporation’s response to a takeover. Much as in the MVS context, this separation of ownership of the corporation from its control may invite conflicts of interest, here between boards and shareholders. The chapter then asks how shareholder-driven corporate governance (SCG) can and should inform regulation of this defensive tactic. It also considers management entrenchment theory and the shareholder-primacy norm in the context of changes of control. Both the normative and the positive aspects of SCG make it necessary to revisit the current legal balance between the interests of directors and the interests of target shareholders in takeovers.

A look at corporate control: the case of Hertz Global Holdings

Purpose The purpose of this paper is to focus on issues of corporate control around the announcement of the decision of Hertz Global Holdings to relocate its corporate headquarters from New Jersey to Florida in 2013. The relocation decision and accounting irregularities discovered after the announcement raised interest from activist investors. The firm responded by enacting a “poison pill,” but control was eventually wrestled away and the CEO was replaced. Examining these events gives students insights into corporate control issues facing a major US corporation. Design/methodology/approach This case study presents a history of the firm from its founding in 1918 through 2017, with an emphasis on key events from 2012 through 2017. These events include acquisition of a competing firm (Dollar Thrifty), relocation of corporate headquarters, accounting irregularities, restatement of financials, activist investor responses, issuance of a “poison pill,” and turnover in the CEO position. Findings The case is intentionally written to “tell the story” of events that relate to issues involving control of the company around the decision to relocate its corporate headquarters. The case highlights potential agency problems between management and shareholders and the market’s response to those problems. Originality/value No prior case study considers the topic of corporate control from the perspective of Hertz Global Holdings. This case study can be used by instructors in graduate and undergraduate courses to examine corporate control issues from a “real world” perspective.