SiliconBeat

Back in November the board of LookSmart, the San Francisco supplier of online advertising software, enacted an anti-takeover device known in governance parlance as a shareholder rights plan, more commonly called a “poison pill,” designed to be swallowed in the event of a hostile takeover bid.

Under the plan, current shareholders were given options to buy preferred shares that would be theirs to exercise should a single shareholder suddenly accumulate a certain percentage of regular shares outstanding, creating an additional obstacle to acquiring that shareholder acquiring a controlling stake.

Critics of such plans say they work against maximizing shareholder value by discouraging bids for a company. LookSmart’s board said it was a way to encourage direct negotiations between it and would-be acquirers.

In order to “address corporate governance concerns associated with rights plans,” LookSmart’s board said it included some features in the plan designed to be “stockholder friendly” in view of recent guidelines issued by proxy advisory firms.

Those steps included making the threshold level of shares accumulated by a single shareholder that would trigger the poison pill a larger-than-usual 20 percent; having the plan expire after three years; excluding what it called “dead hand” provisions (any wonder why we call this column Docu-Drama?) which would limit the ability of a future board to take back the rights, and giving shareholders the “opportunity” to vote on the plan at their annual meeting, which was held June 16 up in St. Helena at the Meadowood Napa Valley lodge, a “center of social, cultural and viticultural life in Napa Valley.”

No word on whether or not shareholders were plied with any of the region’s varietal wines before they voted, but if so, the plan didn’t work: the poison pill was voted down.

But even stranger, the company said in a release today that the board acceded to shareholder’s wishes and rescinded the plan on Tuesday, even though it did not obligate itself to do so when it adopted the plan in November.

In another nod toward good corporate governance, the board named its lead independent director, Mark Sanders, to be its new chairman, separating that role from the company’s current chief executive, Edward West, who will remain on the board, where he has served since 2001, acting as chair for the last three years. West became interim CEO in August and took over the role permanently in January 2008.

Shares of LookSmart, which went through a 1-for-5 stock split in 2005, have risen more than 20 percent so far this year, closing Wednesday at $3.85. They have a lot of ground to recover, though, given that they hit a split-adjusted high of nearly $350 a share in March 2000, at the bubble’s peak.