The consequences of mergers and takeovers may include redistribution of income, closing of some plants and expansion of others, and elimination of specific managerial and other positions and creation of others. Various anti-takeover defenses (e.g., golden parachutes, poison pills, and greenmail) tend to favor the interests of managers over those of Shareowners. They often interfere with the ownership rights of Shareowners and constitute an obstacle to efficient reallocation of resources.
The justification for the use of various anti-takeover defenses should rest on the support of the majority of Shareowners and on the demonstration that preservation of the integrity of the company is in the long-term interests of Shareowners. However, it is also hard to establish whether these defensive actions cause financial prejudice to Shareowners.
Investors should consider the following factors when reviewing a Company's anti-takeover measures:
The ability to use cumulative voting enables shareowners to vote in a manner that enhances the likelihood that their interests are represented on the board. It is a valuable shareowner right.