If managers are misusing a corporation’s assets, there will be profit opportunities for the alert investor who figures it out, buys up a controlling share of stock, and replaces the managers with better ones. This is a hostile takeover....
The takeover is a key tool in what Henry Manne, the great economist and former dean of the George Mason University Law School, long ago dubbed the market for corporate control....
...the federal and state governments have done all they could to prevent corporate takeovers. In 1968 the federal government enacted a law forcing anyone who acquires a specified amount of a corporation’s shares (today it’s 5 percent) to disclose his intentions to the Securities and Exchange Commission. Obviously, if someone announces that he intends a takeover, the stock price will rise, wiping out the profit in the takeover. That was the point.
...managers who feared losing their jobs lobbied Congress and the president. It was special-interest, protectionist legislation all the way....
In the 1980s the states and state courts enacted even harsher anti-takeover measures. The result? “The number of hostile tender offers dropped precipitously and with it the most effective device for policing top managers of large, publicly held companies,” Manne writes.
The article that I linked to was written in 2002. I believe that further corporate managers protection laws were enacted after that article was written in 2002.
|