Countercyclical Antitakeover Law

21 Wake Forest J. Bus. & Intell. Prop. L. 319

Zero lower bound interest rate environments are the new normal, which
threatens the efficacy of traditional stimulus policy and invites
proposals for alternative sources of stimulus. This Note proposes
countercyclical antitakeover law as a form of expansionary legal policy.
Among other things, antitakeover law influences the occurrence of
hedge fund activism. Hedge fund activism produces a variety of
macroeconomic consequences that weigh differently depending on the
prevailing economic environment. This Note posits that the zero lower
bound shifts the balance such that at a macroeconomic level, any
benefits of hostile activism are outweighed by negative externalities.
Accordingly, it may be beneficial for law to respond by deterring hostile
interventions during zero lower bound recessions. In particular, courts
should alter their analysis of takeover defense mechanisms by extending
more deference than is ordinarily given to managers to implement
antitakeover devices. This Note illustrates how countercyclical
antitakeover law could be carried out using the dead hand poison put
as an example. After balancing the variety of economic consequences
of changing the law, this Note concludes that countercyclical
antitakeover law serves efficiency and can stimulate aggregate demand.