Extract to table

The fiduciary constraints on the exercise of that authority — particularly in the context of a specific activist challenge — are significant and must be carefully evaluated

Under the Unocal standard, a board's adoption of a defensive measure is reviewed under a two-part test: First (Threshold Inquiry — Threat Identification): The board must demonstrate that it had reasonable grounds for believing that a cognizable threat to corporate policy and effectiveness existed

Second (Proportionality Inquiry): The defensive measure adopted must be reasonable in relation to the threat posed

This is not a simple balancing test; the board must demonstrate that its response is neither preclusive nor coercive — that is, the measure must not foreclose the possibility of a successful proxy contest or tender offer, and it must not force shareholders to accept a particular outcome against their will

A shadow pill, no less than a publicly adopted plan, must be supportable as a reasonable response to a genuine threat