Bullying and Corporate Takeovers

Aug 03

Politics in the workplace are brought about by¬†“interdependence, divergent interests, scarcity, and power relations inevitably spawn political activity”, according to at least one author. Most references to politics in the workplace relate to intra-corporate affairs involving managers and employees. It’s important to recognize that when ownership in a company is divided, such as a publicly traded corporation, these same characteristics can promote political posturing in extra-corporate affairs.

While politics drive interactions both internal and external to a company, there are some unique conflicts that arise when ownership is divided. Some owners may have little interest in the long term prospects of a company, or its relationship to the environment or a community or even its employees. In this case, they view their ownership interest as little more than an investment, and any measure available to increase the immediate value of that investment is in their best interest.

Naturally this can be in direct conflict with the interests of the managers, employees, communities and even the broader economic interest of a region or a country. It can even be at odds with the interests of other owners. The overarching aim of a company is no longer to provide long term, healthy growth, but rather short term gains, even if those gains come at the expense of the long term interests of other interested parties.

Dell Takeover

One situation that can become very charged politically is that of a corporate takeover. Corporate takeovers occur when a majority interest in a company changes from one entity or group to another. In this case, the conflicts of interest mentioned above can become critical. What changes would the new majority owner(s) make to the company?

Recently in the news we’ve seen many articles related to Michael Dell’s efforts to take his company private. Obviously there are scarce resources at play, and not all investments can be pursued. There is clearly a power play between Carl Icahn and Michael Dell. There are questions about the future of the computing industry. All these issues lead to uncertainty of future, pressure to change and even a lack of flexibility to set a meaningful vision for the company. Stock price has a significant impact on financing decisions, which further drives investing decisions and potentially ignores long term company health.

Bullying

Depending on your alignment, either Icahn or Dell can look like a bully. In the case of Carl Icahn, his posturing, legal actions and general rhetoric are designed to influence the outcome to his financial advantage. He has a broad range of investments with no apparent interest in the computing industry long term. On the other hand, Michael Dell has a very specific interest in the computing industry and the company that bears his name.

While politics and rhetoric can at times aid in meeting the distinct needs of all parties, in a case like this Dell takeover, there is a lot of fallout, much of which is not in the best interests of the company. Is there some way around it? The answer to that question seems to be a no at this point.

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