The report, which can be accessed here, recommends board members:

• Consider drafting shareholder rights plans so that they satisfy standards of acceptability set by the most influential proxy voting advisors such as the Institutional Shareholder Services guidelines but also take into account that:
• • As shown by the CSX Corp. v. The Children's Investment Fund Management case, investors may use certain types of derivative instruments to conceal their relative voting power. Boards should consider whether their rights plans should be drafted to include derivative positions when computing the level of stock ownership a person holds.
  • As shown in the Versata v. Selectica case, net operating losses ("NOLs") can be a valuable corporate asset when they can be claimed for U.S. tax purposes. Since tax law establishes that NOL cannot be claimed if the corporation undergoes an "ownership change" (defined by the Internal Revenue Code as when a holder of 5 percent or more of the company's stock increases its ownership level by more than 50 percent of the corporation's stock over a rolling three-year period), it may be appropriate to implement a poison pill with a trigger below 5 percent. ISS recommends that these poison pills should be evaluated on a case-by-case basis, and expire at the earlier of the pill's third year anniversary and the exhaustion of the NOLs.
• Consider having management maintain a thoughtful business plan for the corporation. As shown in the Airgas case, keeping a sensible, regularly updated, business plan in place and making certain that the board understands and approves of the plan and its assumptions can be very important factors in defending against potential hostile takeovers.
• Consider abstaining from certain defensive tactics, such as introducing supermajority voting requirements or disallowing action by written consent or limiting the ability to call special meetings, because they could cause the ire of ISS and attract activist shareholders.
• Consider adopting advance notice bylaws so that directors can avail themselves of enough time to obtain the information necessary to make a rational business decision about the acquisition or merger offer they have received. Establishing an advance notice requirement may comply with directors' fiduciary obligations as it allows directors to avoid the pressure of a rushed business decision that could be detrimental to a long-term shareholder value creation strategy. As shown in the Nomad Acquisition Corp. v. Damon Corp. case in 1988, Delaware judges have deemed even a 60-day advance notice provision as valid.

"With this Director Notes, The Conference Board continues to respond to the need expressed by many of its member companies for education and guidance on how to address situations of shareholder activism," adds Matteo Tonello, Research Director of Corporate Leadership at The Conference Board, and director of the Directors Notes series. "The report fully embraces the principle that being proactive and forward looking is the best of all remedies."