Smith on Bear Shareholders Litigation
Over at Conglomerate, Gordon Smith has a quick and dirty analysis of the just-filed lawsuit in which pension fund shareholders (Wayne County, Michigan and the Detroit Police and Fire Retirement Funds) seek to enjoin the proposed (and amended) Bear Stearns – J.P. Morgan Chase deal. As does Larry Ribstein at Ideoblog. One of Larry’s points is that companies can avoid this kind of mess by selecting an organization form that simply excises the kinds of the duties that are the basis for the litigation. The prime example of this is Blackstone’s publicly-traded partnership, in which the disclosures are belt-and-suspenders clear that the unit holders have waived just about anything it’s possible to waive.
These latter investments are, in some respects, beyond the law. You buy them because you believe the managers’ interests are completely aligned with the equity owners, or because you believe, in a consequentialist way, that managers will do the right thing because they can’t afford not to. Indeed, the WSJ has an article this morning about the unchecked ability of Blackstone’s managers to set their own compensation, something with which this unit holder has no problem, according to the WSJ:
“I don’t have any problem with their compensation system,” says Robert Olstein, head of Olstein Capital Management, which owns 1.4 million Blackstone units. “These guys are the crème de la crème. If they make money, I make money.”