M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, July 13, 2011

State competition: MA edition

After my recent post on Oklahoma's bid to change its corporate law to require staggered boards of all publicly-traded OK corporations, a well-informed reader confirmed for me why I will always remain a cyncic at heart.  The state of state competition for corporate law and incorporations is ... well ... non-existent.  You see, Massachusetts has a provision similar to the OK provision on its books.  It's been on the books since 1990.  How the amendment came about is instructive.

 In March of 1990, a British firm, BTR PLC launched a $75/share hostile tender offer for Norton Co., a Worcester, MA based manufacturer of abrasives and plastics.  Norton was a publicly-traded MA company that employed over 2,500 employees in central MA.  Following the announcement of the hostile offer to acquire Norton, employees and managers staged protests against the offer and made their voices heard to the state lawmakers. The NY Times described the scene:

While BTR's chairman and chief executive, John C. Cahill, met with Mayor Jordan Levy of Worchester and other local officials, about 1,200 Norton employees and supporters demonstrated outside City Hall, where they burned the Union Jack. 

Flag burnings and protests.  

On March 27, 1990, members of the Worcester delegation to Beacon Hill proposed a bill to amend the MA corporate code.  The amendment would require that publicly-traded firms incorporated in MA have staggered boards unless they opt out in their charters.   The requirement that Norton have a staggered board would slow down BTR's ability to take control of Norton.

On April 13, 1990, BTR annoucned that 64% of Norton stock had been tendered in the offer and that it expected to be able to take control of the corporation at the next annual meeting scheduled for April 26, 1990. 

On April 17, 1990, the MA legislature - both houses - passed the amendment to the corporate code requiring staggered boards.  On April 18, 1990, Gov. Dukakis went to Norton's No. 7 Plant in Worcester, MA and signed the "Norton Bill" into law.  According to the Worcester Telegram Michael S. Dukakis noted the bill was signed on the 215th anniversary of Paul Revere's famous ride to warn of a coming British invasion. Xenophobic much?

On the same day Norton filed a lawsuit to block the tender offer and proxy contest while it pursued a white knight.  More than 100 Congressmen signed a letter to President George H.W. Bush asking him to block BTR's hostile takeover on national security grounds on April 19, 1990.

Anyway, by this point, Norton had the benefit of the "Norton Bill" staggered board, and MA's version of DGCL 203.  It could have hung on for a while, but managers went out and found a white knight - Compagnie de Saint-Gobain - to acquire Norton for $90/share.  A French company.  Sheesh.  

At $90/share suddenly, there were no employees protesting - no burning of the tri-colour.  There were no desperate legislators passing bills.  No reminders of the French and Indian Wars.  There was no worrying about national security and foreigners invading central Mass.  

Anyway, all of this just reinforces what has seemed evident to me for a long time.  Most states don't pay much attention to the substance of their own corporate law.  They can't be bothered.  However, when managers at important locally-incorporated firms have interests at stake, legislators respond quickly and sometimes without much thought to the bigger policy questions about races this way or that.  Such is the state of state competition.




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