The New York Times reports that five independent ACS directors have resigned, after the CEO seems to have demanded their resignations. The resignations appear to hinge on the directors’ objections to the manner in which ACS Founder and Chairman Darwin Deason wanted to buy out ACS. (The NYT article indicates Deason was trying to favor himself by precluding management talks with other potential buyers, among other things.)
 Two points strike me as particularly interesting:
First, the resigning directors allege Cravath acted improperly as both Deason’s counsel in connection with his bid and counsel to corporation in responding to the bid. (The directors said in a letter to Deason “We also find it curious that your counsel in connection with your [purchase] proposal, Cravath, Swaine & Moore, is now serving as the company’s outside counsel.â€Â Cravath’s response to the NYT was “We had no conflict. We represent Mr. Deason, the chairman of the board of directors.â€Â Uhm, what?
Second, Marc Baylin, a portfolio manager with OppenheimerFunds, which holds 7% of the ACS stock, appears to side with Deason, saying the board’s lack of favorable action on Deason’s proposal “has actually lowered the current market value of A.C.S. stock.â€Â My response: So what? What does that tell us about whether Deason’s proposal was the best possible proposal? Almost nothing. A short-term stock drop tells us only a bit about the short-term view of perhaps short-term holders of ACS stock, but those interests do not and should not control the board of directors when responding to an actual control bid.
So, the $50,000 going private transaction question again rears its ugly head, as I ask: When a founder such as Deason starts to make a bid for a firm, when, if at all, is the obligation to actually auction the firm ala Revlon triggered?Â
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Sure, the NYT can get things wrong at times. But if anything, the biggest failure of the Times is neglecting to cover corruption and corporate misdeeds. Sadly, it seems that only campaigns deemed politically correct are deemed worthy for their pages.
But in any event, Hodak’s spanking of the New York Times may become irrelevant. The SEC requires public companies to provide an explanation of any dispute which was related to the resignation of a director, and each such director’s responce must be made public by the company. Remember the HP scandal? We may find out seen enough whether the NYT was unfairly speculating, assuming of course that the company follows SEC regulations.
It would not be the first time SEC regulations requiring such disclosures were blatantly violated as alleged in this set of acts.
No paper is better than the NYT at commingling fact with innuendo. Really, if they simply published the letters, I doubt it would have been as long as their articles about the letters, and we could have been spared their silly interpretations.
I vote for a new format for the broadsheets: publish facts, including letters and quotes; let people who have a clue about the issues offer their commentary; let the blogs handle the counter-commentary. It would save a lot of trees.
Maybe the resignation of five directors has something to do with the drop in stock price.