TUC argues for takeover reform

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Cadbury shows takeovers need reform | ToUChstone blog: A public policy blog from the TUC.

Brendan Barber of the TUC argues:

[W]e need a new kind of economic test handled by an independent mergers and takeovers commission. It would make bidders show that a takeover would be good for the target company. It would take into account the interests of the wider economy, employees, suppliers and local communities. Takeovers funded by unrealistic debt or driven by speculation would be unlikely to pass. Those that make industrial sense would.

Employees should have a proper say and better protection. European requirements for information and consultation are not working properly, and do not even apply to take-overs of solely-owned private companies. The worst reason for a takeover is that it makes it easier to reduce the terms and conditions of the staff once they have a new owner. This is why we have Europe-wide rules of transfers of undertakings, but they do not apply to the takeovers that take place by share transfer — common in the UK, but rare elsewhere. This, too, must end.

It certainly would not mean that there would never be another takeover again. But we need a new balance. It is not even quite right to say that company ownership has become a chip to be played in casino capitalism, for at least gambling is regulated, and there is a limit on what the house can take.

And if this encouraged companies to grow by investing in new products and new services that customers want to buy, rather than by financial engineering, we would all gain.

I advise the TUC: I am not linked to this piece. But I agree with it. The illusion that we profit by financial engineering is just that, an illusion.

We need to move to real business to generate real wealth, just as my Tax Justice Network colleague said elsewhere this morning.