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Nonetheless, many members of Congress think that a fine-tuning of Government regulations is needed to keep the new financial buccaneers from running amuck. High on the wish list is some way to slow down the takeover mania afflicting corporate America. In the past two years, the House Subcommittee on Telecommunications, Consumer Protection and Finance, headed by Democratic Representative Timothy Wirth of Colorado, has held ten hearings on the subject. No simple solutions were found, however. Said one subcommittee staffer: "It's an area where the more you know, the less you want to legislate." Some 64 antitakeover bills were introduced in the House during the past session of Congress, but none were adopted.
In large measure, those who disagree with the idea of intervening in the marketplace to block takeovers seem to agree with James Cloonan, president and founder of the 105,000-member American Association of Individual Investors, a Chicago-based group. Says Cloonan: "An acquisition is the final defense of a stockholder who is being shafted by lousy management. The only way you can get your money out and be saved is if someone comes along and buys the company." In essence, the conundrum is how to curb the excesses of the takeover game without eliminating legitimate and useful acquisitions.
While there is little likelihood of immediate congressional action to curtail destructive takeovers, other institutions are making some tentative moves. The N.Y.S.E. last July proposed a change in its 60-year-old "one share, one vote" rule prohibiting the trading of shares in companies that issue both voting and nonvoting common stock. Under the revised rule, corporate managers and other insiders could issue the voting stock to themselves and the nonvoting shares to other investors, thus retaining control of the company. Corporate Raider T. Boone Pickens has denounced the measure as the "ultimate in management entrenchment devices." So controversial is the Big Board's proposal that the SEC will hold public hearings on the topic starting in December.
Another limited takeover restraint has already been put in place by the Federal Reserve. In January the Fed board ruled that in some cases junk bonds could be used to provide no more than 50% of the financing for takeovers. The Fed ruling is a very narrow one and, so far, has not done a great deal to halt the junk-bond financing trend. But, having taken an initial step, the central bank may eventually decide on further action.
The broader issues of institutional behavior in the stock market and the volatility introduced by computer trading remain among the most contentious of all. Many stock-market experts dispute Drucker's thesis that the stock exchange has become more of a forum for speculation than for long-term productive investment. Says Steven Einhorn, a market strategist with Goldman, Sachs: "The market has not been taken over by people who have a 30-second time horizon. Young companies with good products are traded at high premiums because investors take a long-term view."