What is a poison pill? Under what circumstances are poison pills invoked? Why is this tactic often opposed by investors and proxy advisors? Just the name “poison pill” provides an air of suspense as if someone isn’t going to be happy… Fortunately, unlike a good suspense novel, no one meets their end after ‘ingesting’ a poison pill; yet, this tactic of avoidance is often met with much controversy.
In this episode, Doug Schnell, a partner with Wilson Sonsini Goodrich & Rosati’s corporate division, joins host TK Kerstetter to explain the who, what, when, where and why of poison pills in today’s boardrooms. A mechanism for warding off (or at least slowing down) an un-welcomed takeover, poison pills are ultimately in the hands of the board—and are often opposed by institutional investors and proxy advisors.
Investors are concerned with accountability structures at companies, and they are worried about boards and management teams who are entrenched—who are turning away acquisition proposals without really considering them and without thinking about whether they’re better for the shareholders… A poison pill is a very effective way to prevent a company from being taken over; it won’t ensure it, but it at least prolongs the process.
In this episode, Schnell outlines why proxy advisors often oppose poison pills and how the perspectives of institutional investors may differ. Most importantly, he answers: What questions should the board be asking when presented with a proposal for a poison pill?
The filming of this episode of Inside America’s Boardrooms was made possible by our Knowledge Partners.