Nathan Newman wrote:
> - ----- Original Message -----
> From: "Doug Henwood" <dhenwood at panix.com>
>
>
> Carrol Cox wrote:
>
> >Might it not be correct to say that "shareholders" (the 1% or so who
> >count) have _always_ determined the policies of the corporations, but
> >that during the glory days of the '50s and '60s their errand boys were
> >doing such a "good" job that there was no need to waste one's time
> >interfering?
>
> - -Yeah. They always had the potential power, but it didn't become
> - -actualized until the late 1970s/early 1980s (in the U.S., that is).
> - -Though in the old days, shares were held mainly by individuals; as
> - -institutional investors came to account for a larger portion of
> - -shareownership in the 1960s and 1970s, it became easier for
> - -shareholder to organize and lobby.
>
> I think it was more than just the rise of institutional shareholders,
> although that played a role. Changes in the law gave minority shareholders
> greater power to organize takeovers and courts in Delaware and others
> states, influenced by law and economics, increasingly recognized challenges
> to manager actions, thereby disciplining them in that way.
>
> And don't forget changes in usury laws and other banking regulations that
> opened the way for junk bonds. Without the ability to marshall massive debt
> to leverage takeovers, the large corporations were essentially immune to
> most hostile takeovers before the 1980s by anyone other than even larger
> corporations run by those same class of managers. It was debt leverage that
> allowed the non-managerial class of financiers to newly exercise discipline
> on the industrial class of managers.
Not odd perhaps that it should seem to Nathan from a course in law school that changes in the law were causal. But they weren't. I was there, arguing before Chancellor Brown in the early 80s in Wilmington (and against him in the later 80s after he went back to private practice). Management prerogs formally were not cut back one bit in Delaware (see fiduciary duty/greenmail law for example). But Milken, Black and the other Drexel Burnham boys didn't worry about the law; that's what Skadden was for. The "highly confident" letters, the super-leveraged risk arbs, the hostile tenders, took off quite without any significant changes in the law. The real change that turned on a legal action was that which followed on the indictment of Boesky in the fall of '86. I was litigating the Viacom takeover at the time; the week after the Boesky indictment Icahn joked that he no longer felt "highly confident." Greenmail disappeared, and the Drexel freebooters gave way to the Morgan Stanley etc "friendly" takeovers. Sectors where hostile takeovers happened in the early 80s included many where management had reached mutually comfy deals with unions (airlines, containers, paper&wood, food processing). This was an aspect of the end of the social-democratic/welfare compromise. But all was part of the reassertion of the primary role of the investment bankers (or finance capital if you prefer). The lawyers (and judges) played the roles assigned, and were well compensated for the performance, but were as fleas on the Body of our Lord.
john mage