A scorched earth policy is a military tactic which involves destroying anything that might be useful to the enemy while advancing through or withdrawing from an area. Apparently a translation of Chinese ?? (Jiao Tu), the term refers to the practice of burning crops to deny the enemy food sources, although it is by no means limited to food stocks, and can include shelter, transportation, communications and industrial resources, which are often of equal or greater military value in modern warfare, as modern armies generally carry their own food supplies. The practice may be carried out by an army in enemy territory, or by an army in its own home territory.
The scorched-earth defense is a form of risk arbitrage and anti-takeover strategy. When a target firm implements this provision, it will make an effort to make it unattractive to the hostile bidder. For example, a company may agree to liquidate or destroy all valuable assets, also called “crown jewels”, or schedule debt repayment to be due immediately following a hostile takeover. In some cases, a scorched-earth defense may develop into an extreme anti-takeover defense called a “suicide pill”.