Our study provides empirical evidence that managements have been using bundling to introduce antitakeover defenses that shareholders would likely reject if they were to vote on them separately. We study a hand-collected dataset of public mergers during 1995–2007. While shareholders were strongly opposed to staggered boards during this period, and generally unwilling to approve charter amendments introducing a staggered board on a stand-alone basis, the planners of these mergers often bundled them with a move to a staggered board. We demonstrate that management has the practical ability to obtain management-favoring charter provisions by bundling them with other measures, and we discuss the significant implications our findings have for corporate law theory and policy.

The Bundling Problem

A widely shared premise in the literature on corporate law and corporate governance is that charter provisions are those viewed by shareholders as efficient. The basis for this view is the assumption that these provisions receive at least implicit shareholder support. When firms go public, investors are presumed to price the provisions contained in the company’s charter; as a result, the founders who take the company public have an incentive to fully take into account shareholders’ preferences. After the company goes public, any amendment to the charter requires shareholder approval. This procedure is presumed to ensure that amendments to the charter are those favored by shareholders.

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