Wall Street: Beyond Cynicism

Wall Street: beyond cynicism With a subject like ethics, one man's opinion is generally regarded as no better than another's. Given this, I think my most useful approach might be to tell you some of the things I know about what goes on on Wall Street--and in business in general--that might make the situation seem less omimous than some of you may have thought. Of course, this is not to say that there hasn't been what appears to be an epidemic of flagrantly unethical and illegal activity in the past couple of years. The apple of quick and vast wealh always has been a very attractive one, and its lure has been particularly evident in the past few years. Egged on by a profusion of new and exciting ways to make and spend money, young and old alike have had their appetites whetted to get at least their share--and, if possible, more. Takeovers in perspective One of the most notorious ways of making money has been through getting involved in takeovers, which is how I've made my living for nearly the last 25 years. Theree are a lot of differences of opinion as to whether takeovers are good or bad. When everything is boiled down, though, you have to ask, What's wrong with takeovers, anyway? We live in a free market society that appears to be a lot more effective than the system they have in Russia. After all, in a free market, if somebody wants to come along and offer the owners of the business a premium over the market price, why should he be stopped from doing so? It's certainly not illegal, as long as he obeys the law while he's at it. The owners of the business make a nice profit on their investment and the buyer surely doesn't want to damage what he's bought, if he can help it. He might do some things that you and I would hate to do--lay people off, for example--but he can argue that if he doesnht, some competitor will be able to sell the company's products or services for less and drive him out of business. We could argue all of this for the next year and, while we might learn something, let's accept for the present the acquirer's argument that it's not unethical to take over a company and run it on the right side of the law. In this context, let's look at where takeovers began to cross the line. This activity has been highly lucrative for lawyers and investment bankers. Why shouldn't young people pour out of business schools, eager to get jobs on Wall Street? The trouble is that, as the takeover business went along, the stakes got higher and higher, and from time to time, things went wrong. People who had bet enormous sums of money on a successful outcome found that they took a beating on some deals. So, some people (it's hard to say how many yet, and we probably will never know the true number) decided to make a takeover transaction more of a sure thing. They conspired to pass back and forth information about how takeovers were going, without telling the other investors. They also did other things privately to eliminate their risk of losing money, telling only a few, select like themselves. This was not only against the law; it violated what many people would call ethical behavior, because these insiders deliberately set out to make themselves rich at other people's expense. The recent RJR deal, though certainly legal, was in my opinion a most flagrant instance of selfishness, and for this reason set everyone's teeth on edge. In that instance, the head of the company offered to take the company over himself, along with a few associates. True, he offered the stockholders a nice premium over what the stock was selling for in the marketplace. But he so fattened his own pocketbook in the deal that the public recoiled, asking simply whether there wasn't some way he could give the stockholders more and take less for himself. As it turned out, someone else bought the company. …