Pour une gouvernance créatrice de valeurs®

In the current climate of market volatility prompted by the COVID-19 pandemic, more and more public companies with valuable US tax assets (e.g., net operating loss carryforwards) may, or at least should, consider adopting a shareholder rights plan in order to preserve those tax assets. These plans are commonly referred to as “NOL rights plans” (or “NOL poison pills”). An NOL rights plan is a variation on the traditional takeover defense rights plan, but is designed to protect a corporation’s US NOL carryforwards and other US tax attributes, rather than simply deter takeovers and other hostile attacks not supported by the board of directors. NOLs and other tax attributes can be irreversibly limited if the corporate stock undergoes an “ownership change” (as determined under US tax principles), which can be triggered by certain acquisitions of the corporation’s stock. An NOL rights plan is intended to discourage acquisitions of the stock that might trigger an ownership change.

How consequential is a firm’s adoption of a poison pill for the firm’s directors? Prior research reflects three conflicting views about this question, which reflect conflicting views about pills themselves. The entrenchment view holds that poison pills entrench managers at shareholders’ expense, implying that directors who adopt pills face the risk of shareholder backlash and negative career consequences (E.g., Malatesta and Walkling (1988)). The shareholders’ interest view holds that pills serve primarily to improve the firm’s operations or increase expected takeover premiums, implying that directors who adopt pills are valuable to shareholders and should enjoy career benefits (E.g., Grossman and Hart (1980)). A third view is that the explicit adoption of a poison pill has little impact, either because the actual adoption of a pill is not meaningful (because all firms have latent pills) or because the director labor market does not react strongly to directors’ actions (E.g., Coates (2000)). This view implies that directors who adopt pills should experience neither negative nor positive career consequences.

Dans une étude publiée en septembre dernier, le président de l'Institut sur la gouvernance, Yvan Allaire dressait une liste de 16 sièges sociaux qui pourraient faire face à une offre hostile. À peine huit mois plus tard, on ne parle pas d'offres hostiles. Mais, tout de même, trois de ces entreprises ont été impliquées dans des décisions et des transactions qui viennent réduire le pouvoir décisionnel économique du Québec : il s'agit de Canam, Amaya et maintenant Tembec.

After years of tremendous economic growth, COVID-19 has unleashed unprecedented market volatility and extreme value dislocations for U.S. public companies. Senior management and directors are facing existential business model, strategic, and human resource challenges that are generational in scope. Some law firms and other corporate advisors have responded to the pandemic with a focus on implementing shareholder rights plans or “poison pills” and other traditional defensive measures as a principal corporate response to the pandemic, [1] which has caught the eye of governance experts and media pundits. [2] Updating a “shelf” poison pill may be prudent depending on circumstances, but traditional defensive prescriptions alone are insufficient as a strategy [3] and may distract senior management and directors from addressing the real issues arising from the COVID-19 crisis.