February 8, 2013

Don’t Make Poison Pills More Deadly

Here’s a note from Harvard Professor Lucian Bebchuk:

My latest New York Times DealBook column focuses on an important but overlooked aspect of the debate on whether the SEC should tighten the disclosure requirements of activist blockholders. The column, Don’t Make Poison Pills More Deadly, develops an argument that I made in a Conference Board debate with Martin Lipton.

The column explains that the considered reform may facilitate the adoption of low-threshold poison pills that cap ownership at low levels. Even if the SEC were to decide that tightening disclosure requirements is desirable, it should limit the application of tightened requirements to companies whose charters do not permit the use of low-threshold poison pills. The SEC, I argue, should ensure it does not take any action that would harm investors by facilitating the pernicious use of low-threshold poison pills.