
Explanation:
All the options provided are examples of a 'poison pill' strategy. A 'poison pill' is a defensive tactic used by companies to prevent or discourage hostile takeovers. By making the company less attractive to potential acquirers, it helps to protect the interests of the existing shareholders and management. Here's how each option works:
Option A: Providing attractive stock options to key workers that can be exercised in the event of a takeover. This increases the cost of acquisition as the acquirer would have to buy these additional shares.
Option B: Issuing preferred shares that immediately convert to common shares in the event of a takeover. This dilutes the ownership of the acquirer, making the takeover less attractive.
Option C: Adding a clause to the company's charter prohibiting a new owner from firing existing directors for a period of time. This ensures continuity in the company's management and may deter acquirers who wish to replace the existing management.
Choice A is incorrect. While providing attractive stock options to key workers that can be exercised in the case of a takeover may seem like a deterrent, it does not necessarily make the company less attractive to potential acquirers. This strategy could potentially increase the cost of acquisition due to increased compensation expenses, but it does not trigger any costly events that would deter a hostile takeover.
Q.4885 Which of the following is an example of a poison pill?
A
Providing attractive stock options to key workers that can be exercised in the case of a takeover.
B
Issuing preferred shares that immediately convert to common shares in the case of a takeover.
C
Adding a clause to the company's charter prohibiting a new owner from firing existing directors for a period of time.
D
All of the above.
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