Ultimately, the fate of Telewest is in the hands of its controlling shareholders, Microsoft and Liberty.
Delaware law subjects cash takeovers and buyouts by controlling shareholders to much tougher scrutiny than most stock-swap mergers.
The portfolios look like typical value funds in that they're rich in utilities, financial stocks and firms with controlling shareholders.
Better still: ensure that such protection is not needed, by using the law to align the interests of controlling shareholders with those of tiny investors.
Unhappily for Alcon's shareholders, however, Swiss takeover law does allow bidders to pay one price to controlling shareholders and a lower one to the remainder.
Some types of controlling shareholders seem to be particularly bad.
Controlling shareholders can funnel exorbitant salaries to their hand-picked managers.
Controlling shareholders, often referred to as promoters, are allowed to sell themselves securities at a discount to the market price, which most investors would view as a form of insider trading.
As controlling shareholders, the Barclay brothers are unlikely to agree to sell the Daily Telegraph, the main object of their bid, and may well keep the Spectator, the Chicago Sun-Times and the Jerusalem Post.
Incentive compatibility can be achieved mainly not by stock options but by outright grants of equity to managers as part of their compensation, with the restriction that such positions be held for periods that at least exceed the existing holding horizons of controlling shareholders.
Motivated by the growing literature studying the effects of stock market mispricing on firm behaviour (see for example Stein 1996, Shleifer and Vishny 2003, and Baker 2009), we develop a simple framework for thinking about how stock market mispricing can offset agency costs and induce controlling shareholders to raise outside equity.
FORBES: Do Inefficient Stock Markets Drive Bad Corporate Governance?
In April last year they together acquired 5% of Istituto Bancario San Paolo di Torino, Italy's biggest banking group, becoming part of a controlling group of shareholders.
Several months later, when Russian state monopoly Gazprom bought a controlling stake in the project from its shareholders - foreign companies Royal Dutch Shell, Mitsui and Mitsubishi - the dispute was settled.
According to the online edition of a financial newspaper in the U.K., Indian billionaire and chairman of Mittal Steel Lakshmi Mittal is chewing over relinquishing his controlling stake in a move that could inspirit Arcelor's shareholders to accept the steel raja's hostile takeover bid.
These controlling families ought to be compensated for the additional costs they incur from being less diversified than other shareholders and because they invest more time in overseeing management, he contends.
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