The Impact of Rights Plans on Proxy Contests: Reevaluating Moran V. Household International

13 Pages Posted: 27 Dec 2010

See all articles by Randall S. Thomas

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law

Date Written: 1994

Abstract

American corporate management has sought to insulate itself from dissident shareholders' voting power by enacing "Rights Plans." Rights Plans reduce a dissident shareholder's chances of winning a proxy contest by restricting the number of shares that a dissident group can own. Most Rights Plans severely penalize a dissident shareholder that owns more that a limited amount, or trigger level, of 15% to 20% of the corporation's voting common stock. Rights Plans can stop dissident from forming coalitions with other shareholders if collectively they would own a greater precentage of voting stock than this trigger level. We conclude that in the absence of Rights Plans, dissidents could have acquired larger blocks of stock (or formed stronger coaliitions), whichin turn would have led to a higher proportion of dissident victories.

Keywords: rights, plans, proxy, dissidents

Suggested Citation

Thomas, Randall S. and Martin, Kenneth J., The Impact of Rights Plans on Proxy Contests: Reevaluating Moran V. Household International (1994). International Review of Law and Economics, Vol. 14, pp. 327-339, 1994, Available at SSRN: https://ssrn.com/abstract=1729835

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Kenneth J. Martin

New Mexico State University - Department of Finance & Business Law ( email )

College of Business Administration & Economics
Las Cruces, NM 88003
United States
505-646-3201 (Phone)
505-646-2820 (Fax)

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