WHEN I CAME OUT of the Marine Corps, the plan was for me to get my MBA at night while I worked for my father during the day. I learned the merger arbitrage business, and while I found it challenging and intriguing, I never felt that it was something which had a socially redeeming value -- until I stumbled onto corporate governance.
My first corporate governance involvement was in 1974. There was a conglomerate in Denver called Great Western United. It was basically a holding company which owned a sugar business. Around that time the price of sugar was skyrocketing, so all of a sudden the company was making money hand over fist. They had a series of preferred shares which were several quarters, if not years, in arrears. I had been accumulating a position in the preferred shares, and when I saw the price of sugar start to shoot up, I asked the company why they couldn't pay off the arrears. They simply said, "We are not going to pay off the arrears -- no question about it." I called them a second time and I said, "You know, I really think you ought to pay the arrears. You now have sufficient cash flow to do so?' Still they said no. So I filed suit in Federal District Court in Denver, and within a week I got a check in the mail for the amount of arrears. I said, "Ah hah! There is something here for standing up for what you believe in?' And that is how we got started.
Another case in the early days of getting my spurs was with Gerber Baby Products. They had turned down a bid from Anderson Clayton. I went to the annual meeting to make the point that, since Goldman Sachs, Gerber's investment banker, had turned down a premium offer, they should tell the shareholders what it was that the investment banker thought was a fair offer. I kept pressing them on what was a range of values that management considered to be fair. I was trying to create a dialogue for the future, because if you could pin them down as to what that range of fair value is and an offer happens to be anywhere in between those two limits, then they are stuck. In the middle of my speech, the chairman, John Suerth, had the microphone grabbed out of my hand. I had won the day when he did that. He made the classic blunder of taking away my right of free speech.
What we did as a firm was to take our arbitrage background -- the propensities for risk-bearing and evaluation that one learns as an arbitrageur -- and adopt it to the corporate governance field. This allows us to go in, take a...