Corporate raiders and representatives of America's business establishment agreed yesterday -- at least in spirit -- that abuses in takeovers need to be eliminated.
But they differed widely on the specifics of reform, depending on whether they were trying to defend the role of management in takeovers or trying to reduce it.
The contours of the debate emerged in a hearing held yesterday by the House Energy and Commerce subcommittee on telecommunications and finance. The panel solicited views from major players on both sides of the corporate takeover debate on a legislative proposal offered recently by Reps. John Dingell (D-Mich.) and Edward Markey (D-Mass.). The bill calls for major reforms in how raiders and managements conduct themselves in takeovers and tries to strengthen the role of shareholders in the process.
"Takeovers can be a useful part of the economic scene," H. Brewster Atwater, chairman of General Mills Inc. and a representative of the Business Roundtable, told the panel. "The real problem is the abuse of our capital markets by a few manipulators who put companies into play for short-term financial gain, with no intention of operating them over the long term."
Atwater pointed to profits made in deals by such investors as TWA Chairman Carl C. Icahn, the Haft family, T. Boone Pickens Jr. and Revlon Chairman Ronald O. Perelman as evidence of short-term market manipulation that yielded millions of dollars in profits to raiders and investment bankers, at the expense of shareholders, bondholders and employes.
Atwater applauded stiffer disclosure requirements and the prohibition of large, open-market purchases of a company's stock without a formal tender offer, or a formal bid at a set price.
He also asked that the proposed legislation force bidders to report their intentions to the Securities and Exchange Commission when they have accumulated only 2 or 3 percent of a company's stock, instead of the current 5 percent, and that institutional investors be forced to adhere to more timely disclosure requirements.
Stanley C. Gault, chairman and chief excutive officer of Rubbermaid, who testified on behalf of the National Association of Manufacturers, cautioned that delegating broad powers to the Securities and Exchange Commission, which the proposed legislation envisions, should not be allowed to undermine the power of state courts to pass judgment when disputes arise during takeovers.
"Since the SEC has publicly advocated the short-term benefits of hostile takeovers and has actively opposed tactics that slow takeover activity, such action would put the future of many public corporations at the mercy of arbitrageurs and . . . institutional investors," Gault said.
Harold Simmons, chairman of Valhi Inc. and a noted raider who is actively managing many of the companies he acquired through hostile takeovers, defended a system that allows the purchase of a company to be decided only by the price determined by willing sellers and willing buyers.
"Is the final result really that bad?" asked Simmons. "The net result of many of these things is that stockholders come out a lot better."
He called for the banning of greenmail payments, generous severance payments and poison pills -- defensive tactics that many managements resort to in fending off unwanted raiders -- as well as a federal preemption of state laws that inhibit takeovers.
A Republican-sponsored bill also was offered yesterday that further tightens some disclosure requirements but loosens other provisions of the Dingell-Markey bill.
The Republican minority, which complained that it was not consulted in crafting the reform package that was under consideration yesterday, said the Dingell bill lacks key enforcement provisions.