Valoración por los expertos del sistema de acciones propuesto para los directivos en el

Examples of the British government exerting pressure on Boards to reject takeover offers include cases from the confectionery industry, as noted in the introduction, as well as the pharmaceutical, and oil industries.12 Such political pressure is not confined to the UK, one can find reports in the popular press of governments encour- aging firms to resist takeovers drawn perhaps from every major economy. Scholars have sought to clarify why governments should wish to oppose a free market in corporate control. For exampleRoe (1994) identifies a systematic alignment of the politicians’ interests with those of corporate management. In the same spirit, Hell- wig(2000) argues that the political system can be seen as a stakeholder in its own 12_{Press coverage includes: Bogdanor, A. (2014). The regulators were right to force Pfizer’s}

hand. Financial Times, [online]. Available at: http://www.ft.com/cms/s/0/a476fdf0-e5bc- 11e3-a7f5-00144feabdc0.html#axzz3xbkC23LC [Accessed 17 Jan. 2016]. See also Parker, G. and Christopher, A. (2015). UK government warns BP over potential takeover. Fi- nancial Times, [online]. Available at: http://www.ft.com/cms/s/2/06a3207e-e901-11e4-87fe- 00144feab7de.html#axzz3xbkC23LC [Accessed 17 Jan. 2016]

right, whileJensen(1991) regards the treatment of corporate control by the political system as a reaction to populist rhetoric without an understanding of the systemic implications.

Here we do not take a stand on why government should wish to influence a Board’s decision. Instead our focus is on understanding when political pressure is likely to be most effective, and so when it is most likely to occur. Thus this section considers the case of a government that seeks to pay a cost to altery by exerting political pressure. We therefore hold that a government, or external pressure groups, cannot mandate exactly how resistant a Board should be; but they can encourage it to resist. Given the literature cited above we consider that the costs of opposing a takeover will most likely be incurred if the benefit, in terms of the reduced probability of the takeover being consummated, is sufficient. Hence we believe a government is most likely to pay the costs of intervention ifdβ/dy is large and negative.

Our first main result on this theme is captured here:

Proposition 21 dβ/dy is negative and monotonically decreasing in κ when public information is sufficiently noisy, i.e. small τθ.

Proof. See Technical Appendix.

Proposition21implies that a government will have the greatest incentive to intervene to encourage a Board to ‘have the courage’ to reject a corporate takeover in economies in which managerial Boards are most heavily affected by shareholder sales. Thus, the government incentive to intervene when Boards are strongly protected by the business judgement rule will be weak. However, in jurisdictions in which the purchasers of new shares are very influential and have their shareholder rights respected, the incentive to intervene will be strong. This perhaps surprising result suggests that countries which pride themselves on respecting all shareholders’ rights, perhaps such as the UK and the US, are the ones in which governments will have the greatest incentive to intervene by encouraging a Board to become entrenched

in the face of a politically undesirable takeover. However in the case of the US the extensive application of the business judgment rule might, in turn, lower the government incentive to intervene.

To understand this result note that if shareholder sales have a strong influ- ence, that isκ is large, then the takeover success is highly sensitive to the actions of the existing shareholders. A small impact on the proportion of the shareholders selling during the offer period can therefore achieve a substantial reduction in the deal probability. In proposition20 we noted that an increase in the prior expected level of takeover defence had the effect of increasing the critical threshold x∗ for sophisticated shareholders and so lowering the proportion of shareholders who sell in the offer period. This lowers the pressure on the Board to agree the deal, and in economies with greater respect for shareholders (largestκ) the marginal change from this effect is the most pronounced. As a result the potential gains to government from intervention to alter expected takeover resistancey are at their greatest.

A second result is available:

Proposition 22 dβ/dy is negative, quasiconvex in P, and reaches a minimum whenβ = 1/2.

Proof. See Technical Appendix.

Proposition22 implies that increases in political pressure exerted to endorse takeover defences have the greatest impact on the takeover’s outcome when the probability of a success is otherwise close to a half. Hence, a government is most likely to find the cost of increasing political pressure in opposition to a bid worthwhile if the bidding offer is competitive, but not excessively so, thus implying that the success of the deal hangs in the balance. A graphical intuition is provided by Figure 2.2, where we plot ∂β_∂y as a function ofP. The dashed line represents an arbitrary marginal cost of increasing y, and hence it delimits the corresponding range of takeover premiums for which the government is willing to exert political pressure.

It is possible to see that political pressure delivers the greatest impact when the bidder’s offer is such thatβ = 1₂.

0 -1 -2 V = 10 12 dβ dy

P

example marginal cost of political pressure

region of pressure

β = 1₂

Figure 2.2: Numerical illustration of the effectiveness of increasing political pressure

y as a function of the takeover bid P.

An arbitrary cost of increasing pressure is set at−0.8. When dβ_dy overcomes this cost, the government increases pressure. The dot indicatesP=V +y−κδ

2, which satisfiesβ= 1

2. Parameter values are

V = 10,y= 2,τε= 4,τθ = 5,κ= 3.125 andδ= 0.4, andβis given in (2.6).