Biznesmeny

When I was a lawyer in the ’80s, I used to travel around the U.S. meeting corporate executives, for whom I implemented (as Marty Lipton’s peon) poison pills designed as a bulwark against hostile takeover artists like Asher Edelman and T. Boone Pickens. (There should be a good anagram for T. Boone Pickens. I have two I made up, Russian Deputy PM Aleksey Kudrin — I see drunk alky — and Vladimir Putin — I put rival in MD. My friend Kelso long ago taught me, while we were stuck listening to a dull speech in Sweden, the pastime of anagramming the speaker’s name.) In any case, these CEO’s and their boards of directors embraced the poison pill and other takeover defenses, such as staggered boards, to protect “stakeholders” from “bust-up two tier junk bond financed bids.” At Wachtell Lipton in those days we had a macro that shot out that last phrase.

There has been plenty of academic research on the effects of takeover defenses, and I haven’t read it, but as I noted in a previous post, I refuse to let half-knowledge prevent me from commenting on any subject, because I just may be right, and if I am wrong, who has been hurt, really? Anyway, my “feeling” is that poison pills have done a good job of forcing bidders to pay the best price for a company, but that staggered boards have been a negative. “Staggered Board” by the way does not refer to the condition these gentlemen are in by the time they finish their martinis, though I have seen that too, but a board whose terms don’t expire all at once. This means that to replace the board in a proxy fight, a hostile bidder must wait usually three years. The implicit meaning is that the shareholders cannot be trusted to vote their long-term interests, especially when tempted by a bidder dangling special dividends and other inducements. More specifically, the companies fear their shares will have been accumulated by arbitrageurs, who just want the “short term gain” and will not wait to enjoy the company’s long term prospects. I bet the shareholders of Enron, Lucent, and countless others wish some hostile bidder had come along and saved them from the companies’ glorious long-term prospects.

Many US companies have unstaggered their Boards under pressure from instutional investors such as CALPERS, but a rule that still obtains in the US and almost nowhere else, I believe, is the lack of “cumulative voting” for directors. This means that if you have, say, 10% of a public company, you cannot elect 10% of the Board. In practice you need a majority to elect even one director. The reason the US Business Roundtable is so opposed to cumulative voting is that the presence of a dissident director would disrupt the “collegiality” of the Board. Yes, that bad new guy with his demands for dividends or whatever, wearing his too-strong cologne and his gold bracelet, hair shiny from pomade, speaking in that horrible ethnic accent (what is he, Italian? Greek?) and chopping up the golf course with his uncouth divots. And collegiality has worked so well, hasn’t it? Just think of the disruption if Bernie Ebbers or “Kenny Boy” Lay had had to deal with one or two ornery directors all those years!

All the above was a tangent from what I really wanted to write about, which was my personal reminiscence about meeting all those American executives years ago, and feeling that they were nice and all, but a different race from me. They had silver hair, whether real or synthetic was no matter, tans and good posture, and listened patiently until it was their turn to speak, an interesting innovation I thought compared to the Sawikin family shout-fests.

Later, when I started to meet Russian biznesmeny, it always came as a shock because they all looked like my father and his friends. I remember meeting the CFO of the Nizhny Novgorod telecom and being stunned to see she was a dead ringer for Raisa Karpenkop, to whose house I used to go every Sunday night as a kid and eat chicken paprikash and kasha varnishkes while the Supremes on Ed Sullivan played in the background. I was reminded of this yesterday when I watched a presentation by an executive of Novolipetsk Steel Company and all I could think about was how he resembled my father’s late friend Morris (Moshe) Sempf, with whom my dad survived WWII in Russia and who later became a limousine driver, bungalow colony owner, and all-around meshuggeneh.

It all puts me in mind of the classic Richard Pryor routine about going to Africa for the first time and meeting a diplomat who looked exactly like an old wino from his neighborhood. Pryor thought: “Old wino, you were supposed to be a diplomat!” My dad and Moshe Sempf were supposed to be CEO’s, not limousine drivers!