The Impact of Rights Plans on Proxy Contests: Reevaluating Moran V. Household International
13 Pages Posted: 27 Dec 2010
Date Written: 1994
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
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