Poison Puts and Fiduciary Obligations and the Irrelevance of the Delaware Courts: Pontiac General Employees Retirement v. Healthways (Part 3)

We are discussing Pontiac General Employees Retirement v. Healthways.  Although the case involved a dead hand poison put, the trial judge also discussed more traditional poison puts, including a bit of a history lesson on the provisions.     

• they are great for the two sides of the negotiation who are at the table. So, I mean, that's what we know from the history of the '80s. These things come out of the '80s. And both sides of the negotiation at the table, both the banker and -- both the lender and the fiduciaries, had benefit from the entrenching effect. It's a win-win for them. The person for whom it's not a win is the person not at the table, who then has to actually expend resources to monitor, to bring suit, etc. So, I mean, it's not surprising that these things would proliferate, because for the people in the room, it's great.

So true.  The only way for shareholders to have a say in the matter is to bring a legal action after the fact. Fee shifting bylaws, however, can effectively deny this role to shareholders, leaving the "people in the room" with exclusive decision making authority and no need to worry about the interests of shareholders.  For more on those bylaws, see Shifting Back the Focus: Fee Shifting Bylaws and a Need to Return to Legislative Intent. 

The primary materials in Pontiac General Employees Retirement v. Healthways can be found at the DU Corporate Governance web site.