Remember “poison pills”? Technically known as Shareholder Rights Plans (SRP), they were common in the 1980s and are back in the spotlight.

Netflix (NSDQ: NFLX), the online movie distributor, recently produced a poison pill of its own to ward off activist investor Carl Icahn, famous for his corporate tough love—buying controlling interests in troubled companies, firing incompetent executives and restructuring. After Icahn recently disclosed he had acquired just under 10 percent of Netflix, the company quickly put an SRP in place.

An SRP is there to dilute the potential acquirer’s stake to such an extent that the takeover no longer makes sense. Two approaches are used: Existing shareholders are either given the right to buy shares at a discount under certain conditions; or after the takeover, they can buy the acquirer’s shares at a discount. Regardless of the method, the aim is to make the acquirer whimper away.

The pro of SRPs: They prevent raiders from paying bottom dollar for firms and enriching themselves by selling off key assets. The con: SRPs prevent shareholders from realizing the full value of their holdings through takeovers that could revitalize the company.

Both the pro and con sides raise valid points. On the one hand, poison pills prevent acquirers from buying companies at face value—without paying shareholders a premium on the current share price. On the other hand, because SRPs can be created and dissolved by the board of directors, they often help keep ineffective management teams in place.

In Netflix’s case, many believe the poison pill will keep the company from changing for the better.

After peaking at nearly $300 a share in July 2011, Netflix’s market value has nosedived as subscriber growth has slowed, management has made a series of missteps and the cost of content has skyrocketed due to growing competition. That has left many investors and analysts wondering if Netflix’s executives are more interested in protecting their jobs than maximizing shareholder value.

Unfortunately, most shareholders have little say when it comes to poison pills; all they can do is decide if they’re willing to own shares in companies that have them in place.

If management has consistently increased company value and behaved in a shareholder-friendly way, a poison pill might be a good idea. But what if value has eroded because the executives haven’t kept ahead of market trends or enriched themselves through generous stock plans and pay packages? In that case, a poison pill will likely be to shareholders’ detriment.

So when holding shares of a company, be aware if an SRP exists. This is typically disclosed in the periodic corporate reports and the prospectus. If it does exist, the question you then have to ask yourself is: Can management be trusted to act in shareholders’ best interest?

Thankfully, poison pills have become far less common since the hostile takeover craze of the 1980s. But they can still pose a serious risk to investors if used to prop up ineffective management.