CH1 :: corporate governance and take over defenses

Question 1

governance code Belgium:

Answer 1

• code daems= listed firms –> set of rules to protect interests of SH
  is soft law, moet ge niet volgen maar dan moet ge uitleg geven waarom je niet volgt
• code buysse= voor corporate governance –> make sure corporate governance is good (bv voor ze ipo doen)

–> beide om agency problems tegen te gaan

Question 2

board structure

Answer 2

• unitary board
  = single body of directors –> does not allow different kinds of stakeholder representation
• two-tier board
  = 2 distinct boards of directors –> management board and supervisory board

management board: make decisions, consist of executives

supervisory board: independant directors, elected by SH

Question 3

majority of independant directors

Answer 3

SH benefit when board is OUTSIDE dominated because:
- improves preformance
- more likely to replace poor preforming ceo
- more likely to choose outside ceo

Question 4

factors effecting corp gov EXTERNAL

Answer 4

• insitutional activism
• market for corporate control
• takeover tactics
• friendly takeover tactics
• hostile takeover tactics

Question 4

factors effecting corp gov EXTERNAL
hostile takeover tactics

Answer 4

• BEAR HUG
  = announce public willing to buy firm –> put stress on the board
• PROXY CONTESTS
  = try to get SH to sell shares to you –> sh grant authority to bidder to vote in their behalf
• PURCHASING TARGET STOCK
  buying share, in many countries (to stay under 5%)
• TENDER OFFER TO BOARD
  announce to target sh that you are willing to buy shares

Question 5

pre offer takeover defenses

Answer 5

1) poison pill= give sh oppo to buy new shares at certain price –> becomes more complicated and expensive for bidder
–> when bidder goes through, effect on bidders SH negative door share delution
good for target SH

2) strengten target board defenses:
- staggered board elections (elk jaar kan maar 1/3 board verwisseld worden)
- limit condition that director can get removed

3) limit shareholder actions
- limitations special meetings

4) anti-geenmail
greenmail= buying shares in target, forcing owner to buy them back at premium
anti greenmail= prevent board of directors to approve greenmail payments

Question 6

post-offer takeover defenses

Answer 6

Greenmail
Standstill agreement
Pac-man defense
White knights
Employee stock ownership plans
Recapitalization
Share buy-back plans
Corporate restructuring
Litigation
“Just say no”

Question 7

post-offer takeover defenses

explain standstill agreement
pacman defense
white knights
corporate restructuring

Answer 7

• explain standstill agreement
  = contract between acquirer and target –> limits ability acquirer to buy more stock –> target needs to pay BREAKUP FEE
• pacman defense
  = reverse –> target tries to acquirer the acquirer
• white knights
  = friendly third-party come to aid of target company when hostile takeover is happening –> offer counter-bid
• corporate restructuring=replace equity w debt

Question 8

factors effecting corp gov EXTERNAL
friendly

Answer 8

acquirer obtains support from target board

standstill agreement –> breakup fee