Saturday, October 28, 2006

GM tightens defense against hostile acts

Wednesday, October 04, 2006
GM tightens defense against hostile acts
Bill Vlasic / The Detroit News

General Motors Corp. changed its corporate bylaws Tuesday to possibly thwart hostile actions by large shareholders such as billionaire investor Kirk Kerkorian.

The moves came after GM's board of directors met to consider the ongoing alliance talks between GM, and Renault SA and Nissan Motor Co., as well as Kerkorian's recent request that outside advisers be hired to study the deal.

The board made no statement Tuesday night about a possible GM-Renault-Nissan deal, which is under discussion by the three automakers until an Oct. 15 deadline. "We do not plan to issue a statement tonight on the status of discussions with Renault and Nissan," GM spokesman Brian Akre said late Tuesday.

But the board did make amendments to GM's bylaws Tuesday that could hamper a major shareholder such as Kerkorian, owner of a 9.9 percent stake in GM, from rallying other shareholders to influence the automaker's management.

With alliance talks between GM and Renault-Nissan seemingly making little progress, Kerkorian said last week that he still sees a "strong opportunity" in a possible link-up of GM with the French and Japanese companies.

The 89-year-old financier turned up the heat further by announcing plans to boost his GM stake to 12 percent, and encouraging the GM board to hire independent advisers to study the proposed three-way alliance.

While the GM board did not address Kerkorian publicly Tuesday, the directors made several moves that are typically used to block aggressive shareholders.

One change was to require any shareholder planning a "consent solicitation" to inform the company ahead of time in writing.

A consent solicitation allows stockholders to act by written consents to proposed stockholder actions in lieu of voting in person or by proxy at an annual meeting. Billionaire investor Carl Icahn has used consent solicitations in seeking the removal of board members of companies in which he owns a large stake.

A corporate legal expert said GM's move would require a shareholder -- such as Kerkorian -- to alert GM management before soliciting other shareholders to support the idea of an alliance with Renault-Nissan or another action.

"A consent solicitation can be used as a sneak attack," said Peter Henning, a Wayne State University law professor and former enforcement official with the U.S. Securities and Exchange Commission.

Consent solicitations "can be used by outsiders to force change at a company," Henning said.

On Tuesday, the GM board ruled that it must receive a written notice of a planned consent solicitation, and that the board has 10 days to consider the "validity" of the request.

Also, the shareholder behind the consent solicitation must reveal whether the move is a prelude to a proxy statement -- a device often used by dissident investors to change the composition of a board of directors.

Henning said the changes are "designed to be an early warning system" for GM of a potential shareholder revolt. He said it also indicates that GM is worried that other major shareholders may back Kerkorian's lead in forcing change on the company.

"It's a defensive measure," he said. "It's a standard anti-takeover, anti-proxy move."

The GM board also on Tuesday adopted a majority voting rule for uncontested director elections.

Majority voting requires directors to be elected by a majority of votes cast and not simply a plurality.

GM's board also rejected a proposal to allow small groups of shareholders to gain larger voting rights. The measure would have given each investor a vote for each share owned multiplied by the number of directors to be elected.

The so-called "cumulative" voting could allow a large shareholder to throw all of its votes behind a single board candidate.

Cumulative voting had been approved by a 54-percent vote at GM's annual shareholder's meeting this year. But the board said Tuesday it "chose not to adopt" the process because it "could create the potential for small groups of stockholders to overcome the interests of the majority."

GM's move comes at a time when Kerkorian and his board representative, Jerry York, have a substantial influence over the company.

There was no immediate comment Tuesday from Tracinda Corp., Kerkorian's investment firm.

You can reach Bill Vlasic at (313) 222-2152 or

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