Prof Jonathan Karpoff (University of Washington, Seattle) will discuss his paper:

Abstract

We examine the labor market consequences for directors who adopt poison pills. Directors who become associated with pill adoption experience significant decreases in vote margins and increases in termination rates across all their directorships. They also experience a decrease in the likelihood of new board appointments. Firms have positive abnormal stock price reactions when pill-associated directors die or depart from their boards, compared to zero abnormal returns for other directors. Further tests indicate that these adverse consequences are not universal, but accrue primarily when the pill adoption is costly for the firm. We conclude that directors who become associated with costly poison pill adoption suffer a decrease in the value of their services, and that the director labor market thus plays an important role in firms’ governance. (with William C. Johnson & Michael D. Wittry)