If nothing else, Ivan Boesky has fired up the debate over the value of corporate raiders and their camp followers, the arbitragers. Are these guys really Robin Hood and his Merry Men, as they claim to be? Or are they Genghis Khan and the Mongol hordes?
All I know is what I see, and what I don't.
I see billions of dollars tied up in new corporate debt to keep the raiders at bay while research and development goes begging. I see billions going for greenmail that ought to be building new, high-tech factories. I see confidence in Wall Street's integrity lower than at any time since the big crash. I also see a huge share of America's best management talent wasted on takeover games when it should be devoted to strengthening the industrial base of the country.
But I don't see the raiders creating jobs. I don't see them increasing productivity. Worst of all, I don't see them doing a thing to help America compete in the world.
I hear their holier-than-thou pitch about making companies more efficient, liquefying capital and defending the helpless stockholder. But a funny thing happens to these dedicated missionaries once you cross their palms with a little dough--they go away!
Make no mistake about it, greenmail is nothing but blackmail in a pin-striped suit.
If these people are really interested in saving American business from its incompetent management, where were they back in 1980 when Chrysler was flat on its back? One thing I never had to worry about in those days was a raider coming around, because Chrysler wasn't worth looting.
The typical takeover target isn't a company in trouble. It's a company with a solid asset base, low debt, consistent profits and a few bucks in the bank to diversify or get through the next business downturn.
When I went to school we called that "good management." Today it makes you fair game. Choosing to modernize your factory instead of increasing your dividend might make good business sense, but it's also like putting fresh blood in the water: It draws the sharks. American businessmen are always criticized for not seeing beyond the quarterly earnings statement. We're short-term in our outlook because most of our stock belongs to big institutional investors who'll lose interest in it the minute that earnings statement turns sour.
That's tough enough for a manager to deal with, but when the raiders and the arbs get involved--people who buy huge chunks of stock to hold for a couple of weeks or a couple of days looking for an overnight windfall--you've got even bigger problems. You're forced to do things that make no business sense at all just to stay alive.
My interest in all this started getting too close to home this past fall when two of Chrysler's biggest suppliers, USX and Goodyear, found themselves "in play."
It's hard to exaggerate the importance of suppliers in my business, especially the ones providing the steel and rubber. They're really "partners." One supplier who doesn't meet his commitment can shut all our factories down in just a few days.
So naturally I got worried. I didn't know what the raiders had in mind for my partners. Were they just going to grab the assets and run? Were they going to pocket the R&D budget? Did they give the slightest damn about servicing me? Did they even know one single thing about my business, and how important these suppliers are to me?
Maybe the biggest question of all: Would they force me to go overseas for materials I'd rather see produced by American workers?
I still don't know the answers.
Goodyear managed to survive the raid. It only cost them $2.6 billion. They'll just have to sell off a few subsidiaries, close some plants, put some people on the street and load their balance sheet with new debt. No big problem. (I don't know if they'll ship me better tires. They were doing a good job to begin with.)
Meanwhile, Sir James Goldsmith, the guy playing Robin Hood, said, "I'm walking out of this with my head held high" after aborting his raid. Maybe the cool $90 million or so he got in greenmail helped keep his head high.
So we're in a great big Monopoly game with real money. If this keeps up, Wall Street is going to foul its own nest, and we'll all be losers. The American securities market lubricates our whole economy. We can't afford to smother it with too many regulations, but we also can't afford to let it be manipulated by people out for a quick and dirty buck.
Boesky has guaranteed that Congress will take a close look at Wall Street this session. It's time to at least slow down the action. One good idea I hear is to put a waiting period on stock before it can be voted. Make people wait six months after they buy stock before they can vote it. Most raiders won't tie up their money that long. They're not risk-takers at heart. They only bet on sure things.
They talk piously enough about making American business more efficient, but what they have in mind is rape. And that often makes businessmen too nervous to think about the legitimate and sensible acquisitions and mergers that can actually help companies become more productive and competitive.
I know, because we've been trying to diversify Chrysler. We've made four friendly acquisitions and we're looking for more. But we're not going to kidnap anybody into the family.
Companies are paranoid today, and you can't blame them. CEOs are trying to plan ahead while they're looking over their shoulders. Some of them are spending more time fighting off the raiders who are trying to take over their companies than they are fighting off the Japanese and Germans who are taking over their markets.
That's no way to run a business, and that's sure as hell no way for America to compete.