University of Chicago Law Review

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This Article argues that once undistorted shareholder choice is ensured--which can be done by making it necessary for hostile bidders to win a vote of shareholder support--boards should not have veto power over takeover bids. The Article considers all of the arguments that have been offered for board veto--including ones based on analogies to other corporate decisions, directors' superior information, bargaining by management, pressures on managers to focus on the shortrun, inferences from IPO charters, interests of long-term shareholders, aggregate shareholder wealth, and protection of stakeholders. Examining these arguments both at the level of theory and in light of all available empirical evidence, the Article concludes that none of them individually, nor all of them taken together, warrants a board veto. Finally, the Article discusses the implications that the analysis has for judicial review of defensive tactics.