Ethics of Mergers and Acquisitions

Previous research has investigated the links between Mergers and Acquisitions (M&As) and the monetary magnitude of executive compensation, but failed to inquire how the adoption of specific attributes of compensation contacts relates to M&A activities. We address this gap in the literature by examining the impacts of some M&A characteristics and acquirers' features on the adoption of executive compensation protection provisions and new Long-Term Incentive Plans (LTIPs). The study adopts a longitudinal design before after M&A deals for 80 Canadian acquiring (...) companies that engaged in M&A activities between 1995 and 2001. Our findings suggest that both transactional and organisational characteristics significantly explain the executive compensation arrangements' adoption around M&A transactions, but that the adoption of new LTIPs is subjected to a different set of determinants than the adoption of compensation protection provisions. We interpret these results in the light of the agency, political and institutional perspectives. (shrink)

This paper examines the role of managerial self-interest in the merger market. It looks at factors influencing managers'' merger decisions by analyzing managerial expense preference factors on cross-sectional data employing non-parametric statistical methods. The same factors are examined for acquiring, acquired, and merging firms, and control groups used in each case. The results support the authors'' contention that managerial discretion is a significant motivating factor for mergers. The changes in expense preference factors indicate management decisions which provide conditions allowing management (...) to indulge in management preferred expenditures, while reducing risk to their career. The authors then provide a moral/philosophic framework of ethical analysis for examining manager''s merger decisions, using teleological and deontological theories. They conclude that merger decisions motivated or influenced by self-interest are unethical and, in the process, provide managers facing a merger decision with a framework for making an ethical decision. (shrink)

Except for a small clutch of academic shark-defenders, everyone seems to know that hostile takeovers are wrong, destructive of people and industries, and damaging to the long-term competitiveness of corporate America. But analysis of the takeover process, absent insider trading, fails to identify any injury that is not replicated elsewhere in the business system. Current suggestions for remedying the situation seem inadequate, ill-fitted to the problem, or hostile to the entire capitalist system. Could it be that it is that system (...) as a whole, or the assumptions underlying it, that is at fault? (shrink)

In the contemporary flurry of hostile corporate takeover activity, the ethics of the practice of greenmail have been called into question. The authors provide an account of greenmail in parallel with Daniel Ellsberg's conception of blackmail, as consisting of two conditions: a threat condition and a compliance condition.The analysis then proceeds to consider two questions: Is all greenmail morally wrong? Are all hostile takeovers morally wrong? The authors conclude that there is no basis for answering either question in the affirmative. (...) While there is no cause for moral concern per se, the practices of both greenmail and hostile takeovers yield deeper and more interesting questions for the theory of corporate governance. (shrink)