The Consequences to Directors for Deploying Poison Pills

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. This paper was accepted by Camelia Kuhnen, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.03558 .