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Abstract
International market integration reduces the overlap between economic and political borders, but what, exactly, does that imply? According to some rational choice accounts, it means that globalization will eventually undermine itself by triggering protectionist backlashes. Previous scholarship has highlighted flaws in the underlying assumption that elected politicians prioritize local stakeholders over anonymous shareholders. The present article adds that, regarding foreign takeovers, levels of protectionism would vary even if governments did prioritize local stakeholders, because stakeholder preferences vary across corporate governance regimes. Where, as in the UK, coordination relies more on market mechanisms than on networks, foreign acquisitions are less disruptive, and political mobilization against them is weaker. To the extent that the internationalization of corporate ownership spreads outsider governance by destroying networks, resistance therefore declines as the market expands. Quantitative correlational evidence is supplemented by case studies of bids for three British companies that provoked unusual levels of political mobilization.
Acknowledgements
My thanks go to Ben Clift, Martin Höpner, Paul Lagneau-Ymonet, Sascha Münnich, Britta Rehder, Wolfgang Streeck, Cornelia Woll, Nick Ziegler and the anonymous reviewers for helpful comments on earlier versions of this article.
Notes
1 Coffee Citation(1999: 656) explicitly suggests that political resistance to takeovers may grow as capital markets become more complete, because the incentives to support anti-takeover measures that protect local jobs grow as the costs of such action fall increasingly on foreign shareholders.
2 Classics include Gerschenkron Citation(1962), Shonfield Citation(1965), Zysman Citation(1983), and Hall Citation(1986).
3 As cabinet minister Kenneth Clarke remarked accurately enough, albeit with alienating pride: ‘British predators are more feared than any others across most of Western Europe, and long may that remain so.’ (Commons Hansard, 25 May 1988, column 331).
4 Conversely, actual or potential mobilization may prevent takeovers even without government intervention, because it may persuade buyers to withdraw their offer, persuade owners not to sell their shares, or lead governments to take regulatory action to prevent similar face-downs in the future.
5 Examples include the takeovers of the Franco-European stock market operator Euronext by the New York Stock Exchange in 2006 (see Callaghan and Lagneau-Ymonet, Citation2012), and of the French aluminium conglomerate Pechiney by its Canadian competitor Alcan.
6 Debates in the British House of Commons, recorded in Hansard, were sourced from Millbank Systems (for debates prior to 2006) and from the website of the UK Parliament (for debates from 2006 onward). The search covered all available years, starting in 1805. The term ‘takeover bid’ was first used in 1953.
7 Pilkington: debate on ‘City and Industry’, Commons Hansard, 28 January 1987; debate on ‘Pilkington Brothers’, Commons Hansard, 12 December 1986; debate on ‘BTR and Pilkington Brothers’, Commons Hansard, 15 January 1987; debate on ‘Manufacturing and Economic Prosperity’, Lords Hansard, 5 March 1987. Rowntree: debate on ‘Rowntree plc.’, Commons Hansard, 25 May 1988; ‘Rowntree plc.’, Commons Hansard, 8 June 1988; debate on ‘Rowntree plc takeover bid’, Lords Hansard, 25 May 1988. Cadbury: debate on ‘Cadbury’, Commons Hansard, 26 January 2010.
8 E.g. Barry Jones, Labour, Commons Hansard, 15 December 1986, column 884.
9 Between 1986 and 2005, 3368 British companies went into foreign ownership, compared to 1374 French and 1237 German companies. World-wide, only the United States, at 6218, experienced more foreign takeovers (cf. van Marrewijk and Garita, 2009: 9).
10 Earlier examples of French intervention in foreign takeovers or partial takeovers include the cases of General Electric/Bull in 1964, Westinghouse/Jeumont-Schneider and Fiat/Citroën in 1968, Leasco/SEMA in 1969, ITT/Pompes Guinard, Helena Rubenstein/Parfums Rochas, Heinz/Grey Poupon and General Foods/Orangina in 1970 (see Torem and Craig Citation1971: 324–334).
11 The Guardian, 14 December 1989.
12 Examples include the purchase of Racal's defense electronics business by the French group Thomson CSF in 2000, the sale of a controlling stake in helicopter maker AugustaWestland to the Italian defense and aerospace company Finmeccanica in 2004, and, also in 2004, government approval for the takeover of tank maker Alvis by the American defense contractor General Dynamics. (Alvis ended up remaining British after a successful counterbid by British Aerospace Engineering, BAE). In 1999, the government approved Enron's bid for Wessex Water, and Texas Utilities’ bid for Energy group. In 2008, Electricité de France acquired British Energy.
13 The Times, 24 March 2006.
14 Evening Standard, 12 December 2006, p. 22.
15 Daily Telegraph, 14 February 2007.
16 Sunday Times, 30 May 2004, p. 11.
17 The Guardian, 9 February 2007, p. 37.
18 Daily Telegraph, 28 November 2006, p. 2.
19 The Guardian, 26 July 2007, p. 32.
20 Financial Times, 15 August 2001, p. 18.
21 Daily Post (Liverpool), 16 November 2005, pp. 8, 9.
22 Wiggin accused protesting workers of putting their own jobs at risk ‘by sending out such negative signals’ and expressed doubts on whether anyone would want ‘to hire a whingeing workforce when you can have a positive upbeat one.’ (Birmingham Evening Mail, 22 January 2010 Friday, p. 5.)
23 Kraft had announced a plant closure seven days after the bid had gone through, having previously promised to keep all plants open.
24 Ian Lucas, cited in Birmingham Mail, 27 January 2010.
25 The strength of horizontal, intra-managerial networks (through interlocking directorships or old school ties) is at best indirectly relevant to the functionality of vertical coordination between government officials, corporate elites and local stakeholders and is therefore not documented below. However, data by Maclean, Harvey and Chia (2010: 338f.), Scott Citation(2003: 168), Agardi and Alcouffe (2007: p. 7, table 3), Elouaer Citation(2006: 11) and others suggests that such networks are also weaker in Britain than in France.
26 Moreover, in the UK, 7.8 percent of all firms (and thus more than half of all family firms) were controlled by foreign rather than domestic families, compared to 12 percent in France.
27 The Times, 16 January 1987.
28 Pilkington.com, ‘about pilkington’, cited in Froud et al. (2008: 179).
29 Die Zeit, 20 May 1988.
30 York Press, 6 March 2012.
31 Toronto Star, 2 June 1988, p. D28.
32 The Times, 8 August 1988.
33 The Guardian, 27 January 2010.
34 Associated Press, 2 February 2010.
35 Birmingham Mail, 11 November 2009.
36 Birmingham Post, 20 December 2007.
37 Similar endorsements of target companies were also voiced with regard to a bid for the brewery Matthew Brown by National Distillers (Commons Hansard, 28 November 1985, c.1112), and an expected bid for the Trustees Savings Bank (Commons Hansard, 20 February 1985, c. 1130). A search for the term ‘local community’ did not produce any other examples. A more reliable quantitative measure would require coding all 512 debates in the database. However, the more relevant comparison is not across debates, but between those bids that were debated and those that were not.
38 Froud et al. plausibly argue that their weak integration into industrial networks helps NEDs ‘understand unquestionably how to behave when auctioning the company. This typically means efficiently holding out for the highest price for shareholders … and then endorsing acquisition without questions about industrial logic, the effects on other stakeholders, or any reference to the mass of empirical research on how mergers usually destroy value.’ (Froud et al., Citation2008: 177).
39 Pilkington chairman Sir Nigel Rudd would later be described as ‘British dealmaker extraordinaire or the man who flogged UK PLC to overseas private equity’. (www.thisismoney.co.uk, 29 November 2012, accessed 20 November 2013.)
40 <http://news.bbc.co.uk/2/hi/business/8496873.stm>, accessed 14 November 2013.
41 Daily Post (Liverpool), 16 November 2005, pp. 8, 9.
42 In 1986, stakeholder mobilization had persuaded Pilkington's largest shareholder – Standard Life, a long-term savings and investment business headquartered in Edinburgh – to support the incumbent management despite weak financial performance. (Froud et al.,2008: 179)
43 Financial Times, 12 March 2010.
44 The Times, 20 January 1997; The Guardian, 22 October 2010, p. 31.
45 The Daily Telegraph, 11 February 2006, p. 33.
46 The Observer, 20 September 2009.
47 The Times, 8 November 1988.
48 Le Monde, 15 February 1989, p. 46; La Vie Française, 14 May 1988.
49 Le Monde, 14 February p. 9.
50 The Times, 29 July 2005, p. 52.
51 For analysis of the British parliamentary discourse since the 1950s, see Callaghan and Hees Citation(2013).
52 Sydney Morning Herald (Australia), 9 November 1988, p. 46.
53 The Independent, 21 February 1994, p. 17.
54 The Toronto Star, 8 March 1986, p. A10.
55 Hamilton Spectator (Ontario, Canada), 9 January 1998, p. D13.
56 Daily Mail, 28 February 2006, p. 12.
57 Daily Mail, 13 December 2006, p. 39.
Additional information
Notes on contributors
Helen Callaghan
Helen Callaghan is a senior research fellow at the Max Planck Institute for the Study of Societies, Cologne, Germany. Her research interests include comparative corporate governance, economic nationalism, mechanisms of capitalist development, and the political economy of European integration.