Just Say Never? Poison Pills, Deadhand Pills, and Shareholder-Adopted Bylaws: An Essay for Warren Buffett

My topic is Buffett on mergers and acquisitions and how his sage advice on the importance of shareholder choice should be taken to heart by the Delaware Supreme Court, which will soon face far-reaching questions on the distribution of power between shareholders and the board of directors. Recent judicial decisions in other jurisdictions: (i) have declared that a board can maintain a poison pill in the face of a premium hostile bid, the power to just say no; (ii) have validated the board\u27s adoption of a so-called deadhand pill, a poison pill that can be redeemed only by continuing directors; and (iii) pointing in a different direction, have permitted shareholders to use their bylaw amendment power to constrain the adoption and maintenance of a poison pill. The dynamics of takeover practice are likely to produce cases presenting similar questions involving Delaware targets, and once again the Delaware Supreme Court will have the opportunity for influential rulings on the shape of corporate law. The poison pill has become the main vehicle through which a target board controls the firm\u27s exposure to a hostile bid; its use affects not only the scenarios that emerge after the making of a hostile bid, but pre-bid strategy as well, including the initial decision whether to make a bid. Thus, each of these questions about the use and limits of the poison pill entails potentially far-reaching consequences for the market in corporate control