Hostile takeovers are back in the news with Kraft's bid for Cadbury the latest in a string. South Korea's justice ministry is preparing: "South Korea plans to allow the use of 'poison pills' to help local companies fend off hostile takeovers as the influence of foreign investors grows in Asia’s fifth-largest economy. The justice ministry held a public hearing on Monday to discuss the introduction of a 'poison pill' clause in commercial laws, which would give shareholders the right to buy new shares quickly at a discount when they face an unsolicited takeover bid."

This development is a response to an increase in hostile takeovers in Korea and increased shareholdings by foreign investors. As described in The Case for Market for Corporate Control in Korea by Hwa-Jin Kim:

Now that the business environment in Korea is no longer so favorable to the current owners/directors, they are urging new means of takeover defense such as the poison pill and dual-class common shares and at the same time, are keeping themselves busy searching for other legitimate ways to protect their management control.

Of course, many of the Korean firms are controlled by families, and the private benefits of control in Korea are high, so the incentives for takeovers are intense -- as are the incentives for takeover defense. While we might be tempted to look at a market for corporate control to improve things, it's possible that the structure of corporate ownership is an efficient adaptation to bad commercial law. See Ronald J. Gilson, Controlling Family Shareholders in Developing Countries: Anchoring Relational Exchange, 60 Stan. L. Rev. 633 (2007). If that's true, then, as Gilson observes, "the problem is transition."

Thanks to Don Clarke for the tip.

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