IVAN BOESKY has just given a reprieve to corporate America. In agreeing to settle Securities and Exchange Commission charges of insider trading by paying a record $100 million in penalties, the king of the arbitrageurs has, for a time, taken the heat off moribund managements facing takeover threats.
The Boesky settlement is said to be only the tip of the iceberg, that charges will be levied against a dozen or more speculators, investment bankers and others who similarly have profited from insider trading.Even if this were not so, corporate America can breathe a bit easier. For Mr. Boesky, a major contributor to Republican causes, has just handed the new Democratic Congress a magnificent gift. To think that the Democrats won't use it is to believe that kids will refuse candy.
Paradoxically, the Boesky affair surfaced just as Paul Volcker, chairman of the Federal Reserve Board, joined two leading administration figures, Richard G. Darman, deputy secretary of the Treasury, and Malcolm Baldrige, secretary of Commerce, in chiding corporate management for lack of competitiveness.
To complain that corporate management has been lacking in get-up-and-go, however, is not to say that takeover attempts necessarily are the cure. Murray Weidenbaum, former chairman of the Council of Economic Advisers, told a House subcommittee the other day that there is littledata to support the notion that hostile takeovers promote economic efficiency.
"Yet," he added, "there is no need to argue that . . . every effort to repulse (takeover attempts) is laudable."
The biggest argument against the government's "doing something," he said, is that whenever it does it often does more harm than good. If something, indeed, must be done about takeovers, it should be done at the level closest to the problem and the relevant facts - by the corporation, its owners and managers first; by state law, if necessary; and by federal law only as a last resort.
"If the raiders are opportunists," Mr. Weidenbaum said, "it is boards of directors and senior executives who have given them the opportunity - by neglecting the interests of shareholders. The heart of a positive response to unsolicited takeovers is not poison pills or shark repellants, nor is it government restraint on raiders."
It is action by the corporation's own board of directors. He added:
"The most important, and rarely performed, duty of the board is to learn how to say no. The challenge to many boards is to pay out more cash for shareholders and to reduce outlays for low-yield purposes . . . The record is clear: If the board will not make the difficult choices that enhance the value of a corporation, the takeover artists will. Takeover mania is not a cause but a symptom of unmet challenge."