Effects of the Antitakeover Provisions of Pennsylvania Act 36: A Survey of Empirical Studies

Abstract

Pennsylvania's Act 36, restricting changes in corporate control and shareholder rights, is one of the strictest takeover laws in the United States. As most investors view a free market for corporate control as a mechanism that keeps management from deviating too far from shareholder wealth-maximization, it is not surprising that some, including the California Public Employees Retirement System (CalPERS) and individual members of the United Shareholder Association (USA), are sponsoring resolutions asking Pennsylvania companies to reincorporate in other states. A shareholder presented a reincorporation proposal to the Aluminum Co. of America (Alcoa) at its May 17, 1991 meeting. CalPERS submitted a proposal (later withdrawn) to have Scott Paper reincorporate in Delaware.1 PPG Industries considered a reincorporation proposal at its meeting on April 18, 1991. Pennsylvaniaincorporated companies should expect to see an increase in such proposals in the 1990s. Further, a letter regarding the harm the new law would cause to Pennsylvania companies, signed by 42 prominent scholars, was sent to various Pennsylvania state officials, including the governor, in January 1990.2