In The Netherlands a debate is raging about extra protection of Dutch listed stocks. Is it required? Some believe that take-overs are part of our capitalistic system and that they create value. The pursuer can only offer a higher price if he can increase future cash flows (future cash flows determine the value of a company). Others state that the targets do not have sufficient time to protect themselves against what is called “the arbitrariness of the moment”. On top of that, value for the society as a whole may be destroyed when clients’, employee’s and environment’s interests are sacrificed for shareholders interests. Sadly, politics in The Netherlands don’t get far beyond “stay away from Dutch companies” statements.
This discussion is like the debate about democracy. Do referendums lead to the best decisions? The people are heard, but there is the risk of populism. We have the same question for capital markets: is free market economy always the best?
For capital markets and for democracy no system is perfect and excesses should be fought. Dutch parliamentary democracy will need to ensure that the referendum instrument will not make careful balancing of interests impossible. For capital markets, in their turn, new legislation will need to ensure that balancing of shareholders’ and other interests is guaranteed in case of hostile take-overs. This is about quality of decision making, nothing else.
(also published in Financiele Dagblad, May 13th, 2017)