Quote of the Week #2

By Dominic Jones

THIS is actually a couple of weeks old, but it only recently came to my attention via RR Donnelley’s excellent Real Corporate Lawyer website.

It’s from a single-page memo on June 28, 2007 by heavyweight Wall Street lawyer Martin Lipton of the namesake firm Wachtell, Lipton, Rosen & Katz. Wikipedia says Lipton and his firm invented the poison pill, a mechanism to delay and deter hostile tender offers and other unsolicited acquisitions, among other M&A strategies. Actually, it’s the entire memo I’m quoting below (emphasis is his own):

While corporate governance activists are applauding today’s announcement by
Pfizer “that members of its Boards of Directors will invite its largest institutional shareholders to
a meeting where they will have an opportunity to provide comments and perspective on the
company’s governance policies and practices including executive compensation,” this is another
example of corporate governance run amuck. Since 2002 there has been a steady escalation of
demands by corporate governance activists to increase shareholder power over the business
decisions of boards of directors. With academic support from Prof. Lucian Bebchuk of the
Harvard Law School, activists are seeking to impose prospective and retrospective referenda on
basic decisions by boards of directors.

There is no justification for revolutionizing corporate law and corporate practices
so that shareholders replace directors as the fundamental arbiters of corporate policy. Basic
corporate law and corporate practices, as they have developed and evolved over the past 50
years, is the only proven vehicle for organizing and deploying capital on the large and dynamic
scale of the modern United States economy. It should not be overturned by desperate attempts to
appease deconstructionist activists.
Martin Lipton

Sounds to me more like a desperate attempt to keep things as they are just because that’s how they’ve been for the past 50 years. As I wrote recently in a comment to an IR consultant on this blog: “The only people who should be afraid of better communication are those profiting from the conflict…”

Dominic Jones

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