Dow, Buy-Outs, and Double Standards?

Although I can't point to a free copy on the Web, I would recommend a Richard Beales analysis in last Friday's Financial Times of the Dow Chemical buy-out rumors. The company fired a board director and a senior executive, accusing the two of having “unauthorised discussions with third parties about the potential acquisition of the company.” Mr. Beales's major point is this:

Aside from potentially putting the company into play, the episode raises a question about double standards in boardrooms.

When a chief executive surprises board members with a fully thought-out and funded management buy-out plan that they did not know about, do they fire him or her for having those unauthorised discussions?

Unless Mr Liveris takes this course, we will never know what Dow’s directors would have done.

In other words, should a CEO develop a buy-out strategy without talking to the board, the CEO stays in place. If it's a board member, that director goes. As Mr. Liveris suggested, the director and executive in question "made the mistake of being dispensable."

He also extends the theme to the current furor over the sub-prime market and climbing default rates:

“Predatory lending” is the cry from Washington, with Barney Frank, a Democrat, among those trying to decide who should be financially responsible. Some of the same people used to tell lenders to make it easier for people to get loans to buy homes.

Just another example of why I think the Financial Times is the best paper I've seen, bar none. (And, for full disclosure, I've written for them a few times in the past, though the remuneration was hardly at levels that could buy even temporary loyalty...)