GoingGlobal 179reality even in extreme circumstances such as where managers fight
against a hostile takeover—one of the devices on the horizon in the
late 1960s that Ben Graham thought might operate as a disciplining
force on underperforming managers.^5 For example, in the mid-1990s
the Delaware Supreme Court accepted the arguments of Time Inc.’s
directors, who resisted an unwanted takeover by Paramount, in part
on the ground that doing so was necessary to preserve the company’s
culture of journalistic integrity. Thus, despite even the most rigorous
judicial review of board actions, in takeover contexts, directors have
a great deal of latitude.
Takeover laws do not require any particular action, such as an
auction, or impose on directors any duty to ensure that shareholders
get the highest price. The unifying inquiry in virtually all these cases
is whether a threat to the corporation exists, not solely or even nec-
essarily whether the shareholders’ interests are in jeopardy.
For a dramatic example of what occurs under laws that look
beyond shareholder interests, consider the fight for corporate control
between AlliedSignal and AMP.^6 AlliedSignal offered a 55% pre-
mium over the market price of AMP, a company whose profitability
had seriously dropped. AMP shareholders overwhelmingly supported
AlliedSignal, and within a month of the offer 72% of AMP’s out-
standing shares were tendered into it. Shareholder supporters in-
cluded the family of the company’s founder, Robert Hixon, and many
institutional shareholders, which owned approximately 80% of the
stock, including the Teachers Insurance and Annuity Association–
College Retirement Equities Fund (TIAA-CREF).
Indeed, TIAA-CREF joined a shareholder group that sued AMP’s
board. That group too kthe extraordinary step of separately filing a
“friend-of-the-court” brief supporting AlliedSignal in direct litigation
between AlliedSignal and AMP. TIAA-CREF argued that AMP had
trampled on basic “principles of shareholder democracy.”
Despite this overwhelming shareholder support for AlliedSignal,
AMP’s management successfully erected a series of defensive bar-
riers to the bid. Management too kadvantage of Pennsylvania laws
requiring directors to act in the best interests not of the sharehold-
ers, but of the corporation and permitting boards to act in what they
perceive to be the best interests of employees, lenders, communities,
and others. One extraordinary barrier AMP’s management raised
changed the terms of its “poison pill” so that it could not be elimi-
nated even by directors who held office before any of AlliedSignal’s
directors had joined.