July 10, 2007
Midwest Air Group Takeover
The refusal of the board of Midwest Air Group to sell to AirTran Holdings for $400 million, despite the overwhelming support of Midwest shareholders, is a classic illustration of the power of constituency statutes. Midwest is incorporated in Wisconsin, a state that by legislation empowers corporate boards to look after constituencies other that shareholders (read employees). The Midwest board used the statute to justify the rejection of the bid. Midwest shareholders are now voting the board out, one election at a time (it will take two years; the shareholders elect only one-third of the board a year). The CEO of Midwest, with a healthy yearly salary, has only a modest golden parachute in place. Look for a bigger payout (a "consulting contract") and a deal. Constituency statutes do not help non-shareholder groups, other than senior excutives of course.
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