The Securities and Exchange Commission was told yesterday that there has been a general breakdown in the rules governing corporate mergers and takeovers.
The consensus view from both witnesses and members of the commission came as the SEC opened the latest round of hearings on corporate mergers, with economists debating the effects of hostile takeovers on the economy.
The debate on the propriety of corporate combinations will continue in coming weeks as committees on Capitol Hill also take up the subject. The hearings, like similar ones a year ago, were spurred by a spate of controversial merger activity -- this time, financier Carl Icahn's attempt to gain control of Phillips Petroleum Co. and the targeting of Unocal Corp. by Mesa Petroleum Co. Chairman T. Boone Pickens Jr.
Pickens, who insists his investor group has no interest in taking the company over, said yesterday he had boosted his interest in the former Union Oil Co. of California to 8.5 percent from 7.9 percent.
Panelists before the SEC yesterday generally agreed that the current spate of takeover activity indicates a breakdown in the rules that govern corporate takeover activity, as more and more sophisticated investment strategies, such as "greenmail," have gone beyond the boundaries of previous rules.
"Something has gone awry out there," Commissioner Aulana Peters said during the informal forum on takeover policy. "It may be that we need a new system, as opposed to trying to fix something that's already in place."
But the panelists disagreed on whether the takeover surge was necessarily a bad thing. "A takeover threat is an essential check and balance on poor management," said Roger Kubarych, chief economist at the Conference Board.
Philip O'Connell, vice president of Champion International Corp. and a member of the Business Roundtable, advanced a Roundtable proposal for tighter laws to give boards of directors more protection against hostile corporate raiders.