Management Buyouts and Managerial Efforts

Robert F. Bruner; Lynn S. Paine

Article | California Management Review | winter 1988

Management Buyouts and Managerial Efforts

by Robert F. Bruner and Lynn S. Paine

Abstract

Management buyouts, which have played an important role in the recent wave of corporate restructurings, have been criticized from several directions. This article addresses the problems created by management's conflict of interest. As members of the buyout team, managers have strong incentives to act in their own self-interest, yet they have a fiduciary duty to promote shareholders' interests. The conflict of interest inherent in management buyouts can be dealt with through a system of disclosure and review provided that management, board members, shareholders, and judges apply an appropriate standard of fair price. The authors propose a standard of fairness, the "synthetic MBO standard," based on the implications of management's fiduciary duties in the buyout context. They recommend that the disclosure requirements of the federal securities laws be modified to include disclosure of a company's value under this standard.

Keywords: management; buyout; ethical decision making; Management; Leveraged Buyouts; Ethics; Decision Making;

Format: Print

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Citation:

Bruner, Robert F., and Lynn S. Paine. "Management Buyouts and Managerial Efforts." California Management Review 30, no. 2 (winter 1988): 89–106.

Book | 2020

Capitalism at Risk: How Business Can Lead

Joseph L. Bower, Dutch Leonard and Lynn S. Paine

Who should take the lead in fixing market capitalism? Business—not government alone. The spread of capitalism worldwide has made people wealthier than ever before. But capitalism's future is far from assured. Pandemics, income inequality, resource depletion, mass migrations from poor to rich countries, religious fundamentalism, the misuse of social media, and cyberattacks—these are just a few of the threats to continuing prosperity that we see dominating the headlines every day. How can capitalism be sustained? And who should spearhead the effort? Critics turn to government. In their groundbreaking book, Capitalism at Risk, Harvard Business School professors Joseph Bower, Herman Leonard, and Lynn Paine argue that while robust governments must play a role, leadership by business is essential. For enterprising companies—whether large multinationals, established regional players, or small startups—the current threats to market capitalism present important opportunities. In this updated and expanded edition of Capitalism at Risk, Bower, Leonard, and Paine set forth a renewed and more urgent call to action. With three additional chapters and a new preface, the authors explain how the eleven original disruptors of the global market system clash with the digital age, and they provide lessons on how to take action. Presenting examples of companies already making a difference, Bower, Leonard, and Paine show how business must serve both as innovator and activist—developing corporate strategies that effect change at the community, national, and international levels. Filled with rich insights, this new edition of Capitalism at Risk presents a compelling and constructive vision for the future of market capitalism.

Keywords: Capitalism; business and society; Economic Systems; Economic Growth; Policy; Leading Change; Corporate Social Responsibility and Impact; Business and Community Relations; Corporate Strategy;

Citation:

Bower, Joseph L., Dutch Leonard, and Lynn S. Paine. Capitalism at Risk: How Business Can Lead. Updated and expanded ed. Boston: Harvard Business Review Press, 2020. View Details

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