The state Senate yesterday approved the Glendening administration's proposal to help Maryland-based corporations resist hostile takeovers.
Senators passed the anti-takeover bill, 38-9, without debate. The measure, which also applies to real estate investment trusts, now goes to the House of Delegates, where its fate is less certain.
Business and economic development officials have said that without new legal defenses, Maryland-based corporations and REITs could be gobbled up by takeover "sharks" brandishing tender offers to their shareholders.
"It gives directors more time and flexibility if they are confronted by a hostile takeover attempt, driven by the short-term greed of ruthless corporate raiders," said Richard C. Mike Lewin, state secretary of business and economic development.
The bill would allow boards of directors of locally based companies to weigh the impact of takeover bids on employees, customers and the community before deciding whether to submit them to stockholders for a vote.
The measure also would let directors make it harder for a would-be purchaser to gain control of a company by replacing all or most of the board. Directors' terms could be staggered, and a two-thirds vote of shareholders could be required to remove directors.
Another procedural hurdle to takeovers would permit special meetings to be called only when requested in writing by a majority of shareholders.
"All it does," Lewin added, "is give directors, who are the people in the know, control over the decision on whether, when and how -- and for what amount -- to sell the company."
Scholars, however, have criticized anti-takeover laws, saying they protect inept corporate management and interfere with shareholders' rights to earn top dollar for their investment.
Those concerns motivated at least one of the dissenting votes yesterday. Sen. Brian E. Frosh, a Montgomery County Democrat, said he voted against the bill because "it takes away any obligation directors have to shareholders."
The bill, modeled on anti-takeover laws in effect in other states, was proposed by the governor's economic development commission and has broad support from the business community, including the Maryland State Bar Association and the Maryland Bankers Association.
But Del. Michael E. Busch, chairman of the House Economic Matters Committee, indicated that he is considering amending the administration measure.
"It does take rights away from stockholders," said the Anne Arundel County Democrat. He said he was particularly troubled by provisions making it more difficult for shareholders to call special meetings and to exercise their rights of ownership of a corporation.
Pub Date: 3/26/99