Take-overs ‘method to control management’

Press, 17 February 1984, Page 9

Take-overs ‘method to control management’

PA Wellington Current take-over law allows companies to be taken over by the fastest rather than the highest bidder, according to an Institute of Directors council member, Mr John Fernyhough. Mr Fernyhough, also deputy chairman of the Securities Commission, chaired a meeting of the institute’s Wellington branch to discuss submissions to the commission on takeover law reform.

Take-over was the only effective method left for control of management, he told the meeting. “It has been a fiction for years that directors are ac-

countable to shareholders. “Now shareholders vote with their feet. They go down to their sharebroker and sell their shares if they are not satisfied with the company’s performance,” he said. “Take-over is the only effective method of clearing the decks.”

Take-overs encouraged careful management and thus carried a degree of economic and social responsibility, he said.

Any law detracting from the capability of one company to take over another was thus undesirable. “What the commission wants to encourage is for companies

to be sold at auction to the highest bidder, rather than the fastest," Mr Fernyhough said. “We need to stop the indecent rush under the present cash offer situation."

American lawmakers, already some 15 years ahead of New Zealand in take-over legislation, were now dealing with the problem of the “sometimes extraordinary" measures taken by target companies to avoid take-over, he said. “The United States law should neutralise the board of the target company. Once the bid is in, their hands are tied, they leave it to the shareholders to decide,” he said.