Discovering ironies amid the life and times of Conrad Black is like finding gold in California circa 1849. The stuff’s there at your feet—you just have to bend over and pick it up. The latest turns up in an otherwise unrelated article from yesterday’s Wall Street Journal, discussing the details of Rupert Murdoch’s $5-billion bid to purchase Dow Jones and its primary asset, the self-same Wall Street Journal. To date, Rupe’s been rebuffed by the putative “owners,” the Bancroft family—who, despite the fact they own only 25 per cent of the equity, control the company through their majority ownership of the voting shares (sound familiar?). The board of Dow Jones, whose fiduciary duty to the shareholders resides rather more with the other 75 per cent than with the Bancrofts, has decided to keep its powder dry. But for how long? Which is where we join the Wall Street Journal article already in progress:
“Although the board is taking no action now, it could be more forceful later on. The roles of corporate boards and controlling shareholders have been addressed a number of times in the Delaware courts. (Many U.S. companies, including Dow Jones, are incorporated in Delaware.)
‘Delaware case law says that the controlling shareholder can’t dictate the terms of any transaction and the independent directors must have real bargaining power’ with potential suitors, says Eric Chiappinelli, a professor at the Seattle University’s law school who studies takeover issues and family-run businesses.
Mr. Chiappinelli and others who specialize in corporate governance and takeovers cited a 2004 case in which the Delaware chancery court denied an effort by media baron Conrad Black to block the board of Hollinger International from selling Britain’s Telegraph newspaper. Mr. Black was a majority shareholder of Hollinger’s holding company and opposed the deal, saying that it required a shareholder vote.
‘Controlling stockholders have no inalienable right to usurp the authority of boards of directors that they elect,’ wrote Delaware Chancery Court Vice Chancellor Leo Strine in a 93-page decision in the case. That situation, however, involved the sale of an asset, not the whole company.”
So, Rupert Murdoch, who, as I have argued before in this space, pushed over the first domino leading inevitably to Conrad’s current travails, may now benefit directly from the legal precedent that he helped engineer. You couldn’t make it up.