FECON 5.5
Terms
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- in a proxy contest
- an outside group seeks to obtain representation on the firms board of directors. Proxy contest are usually directed against the existing management. EX A proxy contest occurs when the acquiring company attempts to convince shareholders to use their proxy votes to install new management that is open to the takeover.
- There are three external control mechanisms
- to limit agency problems in publicly traded corporations: market of corporate control (takeovers of poorly managed firms) managerial labor market (track record of managers affecting future executive income and employment) and product market competition (Economic Darwinism). EX Korean Management: most powerful external control is the political elite and government buearcracy. Since in the past they had provided administrative and financial support to business, they had the power to monitor large corporations.
- in a tender offer
- an outside group request existing shareholders of a corporation to sell their shares to the outside group at a pre set tender price to gain control of the corporate management.
- a bear hug
- is a tender offer where the outside group first seek approval from the corporate management and board of directors.
- a hostile takeover
- is a tender offer where the corporate management and board of directors reject the offer but the outside group continue to proceed with the tender offer to win corporate control.
- a greenmail
- is a premium repurchase of stocks owned by the takeover party to prvent a takeover usually with an agreement from the takeover party not the pursue another takeover of the corporation in the future EX occidental petroleum paid greenmail to David Murdock in 1984 and Goodyear tire and rubber company paid sire james goldsmith $93 million in 1986
- a posion pill
- is restructuring by a corporation subject to hostile takeover to reduce the attractiveness of the takeover.
- Fifty percent of top management
- of target firms are gone within three years of taeover. EX
- organization capital comes from three sources:
- 1 learnign by doing, production, management, customer/government relations and research/innovation. 2 learning by matching workers to job workers to team 3learning by cooperating: team work EX Walmart
- other corporate capital
- -liquid assets EX cash and money market instruments -real assets EX real estates and expensive equipment -patents, trademark, copyrights EX pfizer, macdonald capital records -reputation: with consumers, suppliers, workers and govt -earning power EX cable companies -market access EX walmart -funds access EX GE Capital