2003 year end review (final)

TrueCourse, Inc.
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News Release

Contact
Tom Quinn
Telephone (212) 209-3362
[email protected]
FOR IMMEDIATE RELEASE
Companies Dismantle Takeover Defense Arsenals in 2003
Poison Pill Adoptions Fall To Ten-Year Low New York (January 22, 2004) – U.S. public companies caught in the whirlwind of scandals and eroding investor confidence responded to shareholder pressure and made themselves more shareholder friendly by reducing their protection from hostile takeovers in 2003. According to data compiled by TrueCours e, Inc., a New York-based research firm, hostile takeover defense
protection decreased significantly in 2003. “It appears that to some companies the threat of angry investors exceeds the threat of potential raiders,” noted Jim Sussmann, president of TrueCourse.
TrueCourse measured relative takeover defense protection with its proprietary Bullet Proof
Rating on a scale of 0 to 10, with 10 indicating the strongest takeover defenses. The average
takeover defense protection of companies in the S&P 500 fell 4.05% to 5.69 in 2003. The
average takeover defense protection of the Dow Industrials also declined 6.21% to 3.17, while
the average Bullet Proof Rating of companies that completed IPOs in 2003 plummeted 31.8% to
3.36. The Bullet Proof Rating is a weighted index that takes into account provisions and
procedural items that contribute to defending against hostile takeovers. Biggest Decreases in Takeover Defense Protection - S&P 500
Bullet Proof
Bullet Proof
The decrease in 2003 was driven primarily by companies switching to annually elected boards from staggered board elections – where each director commonly stands for election every three years and elections are held for only one-third of the board in a given year. The proportion of companies that went public in 2003 with a classified board fell to 49.3% from 82% in 2002. The
decrease was also impacted by companies redeeming shareholder rights plans or “poison pills” as well as removing supermajority vote requirements for approving mergers. Proportion Of S&P 500 With Defense Provisions In Place
S&P 500
S&P 500
Defense Provision

Pfizer, Inc., which was the largest company with a poison pill in force, dramatically reduced
their structural defenses over the last two years. On October 10, the company announced they would accelerate the expiration date of their shareholder rights plan to January 1, 2004 from October 2007. In the press release announcing the Board's decision to eliminate the rights plan, Pfizer stated the decision to end the provision moves them further into the vanguard of
progressive corporate governance reform, and the action is designed to comply with recognized best practices of corporate governance. “With a market cap over $250 billion, Pfizer doesn’t face significant risk from opportunistic raiders, so reducing their defenses will put them in line with other mega caps,” said John Laide, vice president of TrueCourse.
Poison Pill Adoptions
The rate of new adoptions of shareholder rights plans or poison pills fell to a ten-year low in 2003. Only 99 U.S. companies adopted new plans in 2003, down 42.11% from 2002 and the
lowest level since 74 plans were adopted back in 1993. Proxy Proposals to Redeem or Require Vote on Poison Pills
Joanne Allegra, vice president of TrueCourse, noted that, “there has been considerable pressure
on companies to comply with new best practices in corporate governance.” The number of shareholder proposals to redeem or require a shareholder vote on poison pills continued to soar in 2003 with 100 proposals, up 194% since 2001 when only 34 proposals were made. “In many
cases, the issue is really a referendum on management and not really about poison pills at all - almost a quarter (23%) of all companies that had a poison pill proxy proposal didn’t even have a pill,” observed Allegra.
One company that bucked the trend and increased their takeover defenses in 2003 was Siebel
Systems, Inc. In January, Siebel adopted a poison pill and increased their Bullet Proof Rating to
9.25 from 5.25. Siebel Systems is a rival of Oracle Corp, which launched a hostile bid for
PeopleSoft on June 6, 2003. “If PeopleSoft had not prepared itself by adopting effective takeover
defenses, it’s unclear if Oracle would have significantly raised its original bid of $16 per share. At this point, the raised bid means an extra $1.2 billion for PeopleSoft's shareholders if a deal is comple ted,” said John Laide . “PeopleSoft vs. Oracle is a good example of the potential benefits
that shareholders and other constituencies such as customers and employees can derive from takeover defenses,” added Laide .

TrueCourse is a New York-based research firm specializing in takeover defense intelligence, proxy voting
and corporate governance. TrueCourse provides online products, custom research and consulting services
to institutional investors, leading investment banks and law firms. For more information on TrueCourse,
visit www.SharkRepellent.net

Source: https://www.sharkrepellent.net/pub/2003_year_end_review.pdf