Hi, my name is Angelique Vega and welcome to TransLegal's lesson of the week.
Today we're going to be discussing shark repellents.
A shark repellent, also known as a porcupine provision, is a strategy used by corporations to fend off unwanted or hostile takeovers.
There are many examples of this.
One example which many have heard is the golden parachute which is a contract with top executives that makes it extremely expensive to get rid of existing management.
Another example is called a defensive merger, in which the target company combines with another organisation that would create anti-trust or other regulatory problems if the original unwanted proposal were to be consummated.
Another example is the staggered board of directors, which is a way to make it more difficult for the corporate raider to install a majority of directors sympathetic to his or her views. And last but not least is a super-majority provision. This might increase from a simple majority to two-thirds or three-fourths, the shareholder vote required to ratify a takeover by an outsider, making it virtually impossible to achieve.
Although this concept is well-intentioned, many shark repellent measures are not in the best interest of the shareholders as the actions may damage the company's financial position and interfere with the management's ability to focus on critical business objectives. Again shark repellents often benefit corporate officers more than the stock holders.
That's today's lesson today on shark repellent. If you have any questions or comments please fill them in the box below. Thank you, have a nice day.