The use and abuse of executive powers in warding off corporate raiders

Abstract

As corporate raids become more prevalent, top corporate executives have asked for and often received additional executive power to ward off raiders or “sharks”. For example, they have been given the use of “shark repellents” such as staggered elections for board members, cumulative voting, super majority voting requirements, and the power to sell off the firm's “crown jewels”. Are they abusing these powers as they attempt to save their jobs, at the expense of stockholders, by driving off the corporate raiders who might unseat ineffective management? In this article the practices being used by entrenched managers to make their firms less attractive to raiders and the defense tactics they are using in corporate takeover battles are examined from an ethical viewpoint.