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The Consequences to Directors for Deploying Poison Pills

Author

Listed:
  • William C. Johnson

    (Manning School of Business, University of Massachusetts Lowell, Lowell, Massachusetts 01854)

  • Jonathan M. Karpoff

    (Foster School of Business, University of Washington, Seattle, Washington 98195)

  • Michael D. Wittry

    (Fisher College of Business, Ohio State University, Columbus, Ohio 43210)

Abstract

Using director-specific, within-firm variation in poison pills, we find that pill-adopting nonexecutive directors experience a decrease in shareholder votes, an increase in termination rates across all their directorships, and a decrease in the likelihood of new board appointments. These consequences are not because of poor firm performance, active bid resistance, or hedge fund activism, and accrue especially when the adopted pill is relatively costly to the firm. Firms have positive stock price reactions when pill-associated directors die unexpectedly, compared with negative returns for other directors. We conclude that pill-adopting directors experience a decrease in the value of their services.

Suggested Citation

  • William C. Johnson & Jonathan M. Karpoff & Michael D. Wittry, 2026. "The Consequences to Directors for Deploying Poison Pills," Management Science, INFORMS, vol. 72(6), pages 5274-5296, June.
    • Handle: RePEc:inm:ormnsc:v:72:y:2026:i:6:p:5274-5296
    DOI: 10.1287/mnsc.2023.03558
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