Governance of Corporate Takeovers: Time for Say-on-Takeovers?

Table A1. Glossary of Governance and Takeover Germs Term Description Hostile takeover Acquirer makes takeover offer without target firm board consent or approval Unsolicited takeover Generally synonymous with hostile takeover. Also means the offer was not requested by the target firm board. Antitakeover provisions Target firm provisions in the bylaws or board approved motions to prevent unsolicited takeovers Poison Pill Target firm board approved motion to trigger a dilution of shares typically through a dividend issue, if an acquirer secures a threshold of ownership such as a 10% stake Staggered Board The separation of directors on the board into separate classes where only one class comes up for reelection each fiscal year. The typical number of classes is three such that it takes at least two years for an acquirer to take control of the board through a proxy vote. Classified Board Same as a Staggered Board Board entrenchment The characteristic of a board that seeks to maintain their incumbent board position. Entrenchment is enabled through anti-takeover measures such as Poison Pills and Staggered Boards. Bargaining power hypothesis The hypothesis that an entrenched board is better able to secure a higher premium from an acquirer than a non-entrenched board.