Securities and Exchange Commission Chairman John S. R. Shad said yesterday that, on balance, mergers are good for America -- putting money in the pockets of shareholders to reinvest in the economy.
"Most of the situations where there is a merger or takeover often involve a substantial premium for the shareholders' equity," and the result is generally "a net economic gain," Shad told reporters.
But he said that the SEC is reviewing regulations governing tender offers to determine whether additional regulations are needed.
Shad added that he shares congressional concern over "exporting control of American corporations." Recent congressional hearings have focused on measures that would make Canadian takeovers of U.S. energy firms more difficult. But as long as Canadian firms compete under the same rules that apply to would-be buyers in the United States and are willing to pay premiums to shareholders, those takeovers are good for capital formation because they send money flowing into this country, he added.
The SEC has supported proposed legislation that would put the same limits on borrowing by foreign firms seeking to buy control of a U.S. corporation that now apply to U.S. investors.
Shad, a former official with the investment firm of E. F. Hutton & Co. Inc., met with reporters formally for the first time yesterday. In a wide-ranging session, he also said that the SEC and the Commodity Futures Trading Commission are meeting on a regular basis to determine whether they can clear up jurisdictional problems caused by the blurring of lines between commodity and other futures contracts and stock options, hoping to find an answer before Congress intervenes.
"If it goes to the Congress for resolution, it could open up much broader areas of consideration," he said. As distinctions between banks, insurance firms and securities firms have become fuzzier, questions have arisen about how to match the regulatory equipment to the evolving institutions. Shad indicated that he would rather deal with the specific problem of the SEC and the CFTC before getting into these even more troublesome areas.
Shad also told reporters that the jury is out on whether various changes in corporate boards adopted in an attempt to make boards more effective and responsive actually have worked.