Moran v. Household International, Inc., 500 A.2d 1346 (Del. 1985)
Moran v. Household International, Inc.
Can a corporation legally implement a 'poison pill' strategy as a defensive mechanism against hostile takeovers according to Delaware corporate law?
Under Delaware law, board actions are evaluated under the 'business judgment rule,' which protects informed, good faith decisions made by a board in the best interest of the corporation and its shareholders, barring evidence of gross negligence or conflict of interest.
The Delaware Supreme Court ruled in favor of Household International, upholding the legality of the poison pill defense within the framework of Delaware corporate law.
Moran v. Household International is a cornerstone case as it validated the use of poison pill strategies, guiding future board decisions on defensive measures. It articulated the principle that boards have substantial authority to act in the interest of protecting the corporation and its shareholders, provided they adhere to their fiduciary duties. This case is essential for understanding the latitude directors have under the business judgment rule in Delaware, a key state for corporate governance.