Iryna P. Mihus, Doctor of Economic Sciences, professor

Head of the Management Department of the

Cherkasy National University named after Bogdan Khmelnitsky

 

GREENMAIL AS PART OF MODERN CORPORATE RELATIONS

 

Corporate blackmail - a phenomenon quite common in the activities of Western companies, in recent years has spread into Ukrainian practice of corporate conflicts.

Modern dictionaries define Greenmail as an activity aimed at obtaining excess profits through speculation or abuse their rights of a shareholder against the company. This goal achieved through the acquisition of such number of shares of a company which creates a threat to its acquisitions to further resell the shares at an inflated price of the same company.

The term "greenmail" comes from blackmail (black-mail"), which means criminal blackmail and extortion. However, between the "green" and "black" s is a fundamental difference: classic greenmail always done within the law.

The practice of corporate blackmail was used for the first time in the U.S. in the mid 80-ies of XX century, when famous financiers Pikens Thomas (Thomas Pickens) and James Goldsmith (James Goldsmith) received a windfall in the operations of The Goodyear Tire and Occidental Petroleum by elements of greenmailing.

However, the global spread of this phenomenon acquired by American billionaire Kenneth Dart. In the early 90-ies of XX century it bought nearly 4% of Brazil's foreign debt. In 1994, when the country agreed with 750 lenders on restructuring its debt, only Darth disagreed with the proposed plan and requested for a specific condition. Lead negotiations with him was impossible, as required by Darth consent astronomical amount. The Government of Brazil restructured its debts without standards. He sued and eventually won over $ 800 million a year, he tore the issue of Brazilian bonds, releasing to market their securities due to him part of the debt, and thus triggered the financial crisis.

Classical scheme of greenmail always meet the law, but is only part of a targeted campaign hostile takeover. In most cases, from a legal point of view following the formal legal tender character, because shareholders only protect their rights. Corporate blackmail begins when a minority shareholder submits a claim for causing him damages actions majority shareholders. It calls for use as a means of claim not only arrest majority stake holder, but banning him to participate in the general meeting of shareholders. The reason for this action is usually inconsequential. Then hold a general meeting of shareholders at which "enemy" side has a majority, elect a new board of directors and new CEO. The new leadership quickly selling assets Society.

There are other ways of corporate blackmail:

requirement minority of the extraordinary general meeting of shareholders. Minorytary hopes of procedural errors, for which he could challenge the legitimacy of the meeting. There are also requirements for the early audits, providing information on economic activity of the company, shareholders, etc.;

supply of various lawsuits concerning appeals against decisions to issue securities. The main goal - to change the balance of forces in joint-stock company;

the administrative burden on management companies, power grabbing, blocking the court at the request of shareholders' production company, address complaints to regulatory and law enforcement;

publication of unfavorable media for the management of the company and information, including spreading rumors about a quick bankruptcy, criminal proceedings against the administration, discredit in the eyes of contractors and partners and others.

In Ukraine, when it comes to corporate conflicts, often use the term "raid" or "absorption", but greenmail in Ukraine. Very often, corporate conflict is identified as blackmail. Outwardly, it looks as consistent shareholder advocacy of their legal rights. Greenmail used not only to force the company to purchase securities that are greenmailers. Most often it is used in the schemes of hostile takeovers. However, in some cases, corporate blackmail may be a way of protection of minority shareholders.

This activity involved mainly investment firms engaged in your business projects from hostile takeovers. In their staff are highly qualified lawyers, economists, psychologists, specialists in PR and GR. It should be noted that domestic law does not determine corporate blackmail, mechanisms for detection and suppression, damage assessment of majority shareholders, the responsibility of greenmailers before the law and so on.

Corporate blackmail requires a clear plan of action, money, conspiracy, use of legal and unjust practices, insider information and bribery of officials, as well as knowledge and usage errors administration. It is particularly dangerous for companies weak in organizational, financial or legal terms, such that no internal security staff and corporate lawyers. It is therefore important prevention related adverse action.

Complex protection include:

minimization of a minority shareholder;

bringing internal corporate documents of the company in accordance with applicable law;

maximum compliance under the law of shareholder rights;

control access to insider information of the company;

prevent the occurrence of corporate intelligence, external influence on management.

In most countries greenmail prohibited by law. For example, the U.S. gains from selling shares at a price above the market are taxed at 80%, making such activities unprofitable. But there is a perception that corporate blackmail in a way contributes to natural selection. Availability of greenmailers makes management of companies organized in approach to work, to prevent the erosion of assets, to comply strictly with the procedural rules of corporate governance.