The ethical problems linked to hostile acquisitions ? Example of Mittal/Arcelor

Résumé du document

Since 2004, I have been particularly interested in finance and more precisely in the 'stock market world'. This is why I wanted a topic related to finance. My topic can be summarized in this sentence, 'The ethical problems linked to hostile acquisitions'. Instead of acquisitions, plenty of words can be said like takeovers, mergers etc. The topic is related to the theme, more precisely with 'ethical issues' because the consequences of a takeover can be an important ethical issue, for example, if hostile mergers destroy jobs. The topic is also very interesting because there are more and more hostile takeovers in the world and nowadays, and a lot of sectors are merging. Like a case study, I have chosen the merger of Arcelor and Mittal Steel. Mittal Steel is the biggest producer of steel in the world and has bought Arcelor which was the leading producer in Europe. This merger happened in 2005. The paper will show hostile acquisition consequences, for the buyer and the target, what are buyers motivations? What are the employment consequences? How is it possible? What is the aim of the mergers? Nowadays, plenty of the biggest multinationals enterprises (MNE's) are concerned by mergers and that globalization is going to accelerate this phenomenon. European merger transactions are being propelled by several economic and political forces that have developed in the last 10 to 15 years. Globalization has lead to industrial competitiveness and financial markets have become more integrated.

Extraits

[...] The key idea in Kant's ethical theory is that there are limits that rational beings would place on their own conduct. Kant believe that any valid moral rule could be followed by everyone (Boatright, 1999:56) In fact actions should be taken with a global point of view, and the golden rule 'do unto others as you would have done unto yourself' could have an impact on mergers and acquisitions. If you are a stakeholder, who funds the firm, would you like to see your company bought and destroy by selling assets to different buyers? [...]

[...] ‘Significant empirical evidence exists which illustrates that well-planned takeovers benefit the stockholders of the acquiring firm. For instance, Jensen and Ruback (1983) and Shleifer and Summers (1988) found that many successful takeover attempts do increase stockholder returns. Furthermore, Dodd (1986) observed that target firm shareholders also experience abnormal positive gains in market price, and the effects on the market price appear to be permanent.' (Chase, 1997) But a concern happened here, because of the agents' role. main problem with agency relations arises when a principal cannot monitor the agent's performance.' (Boatright, 1999) The shareholders of a corporation who hire a manager to oversee production in a factory have an even greater challenge in holding the manager to a contract because of the greater opportunities for a manager to act in his or her own interest. [...]

[...] This method is impartial and is not influenced by own values of people. second benefit is that the decision making process is relatively simple to operationalize. With the market ethic, qualitative judgments logically flow from quantitative analysis.' (Chase, 1999) This methodology is very good and impartial and all managers doing this framework should find likely the same result. The market ethic framework, however, has some serious drawbacks that must be considered. Human aspect is not taken in consideration, since for instance “employees are drastically affected by a merger or acquisition because in almost every case a number of jobs are shifted or even eliminated” (Werhane, 1988:41 in Chase, 1999). [...]

[...] Proportionality Stage 3 What are the types of good and evil which will result from the merger or acquisition? What is the urgency of the situation? What are the probabilities of the possible good and evil outcomes? What is the degree of causality associated with each of the outcomes (the intensity of one's influence)? What alternatives to the proposed merger or acquisition are available? How does each of the available alternative fare under this analysis process? Fig A proposed ethical analysis framework for mergers and acquisitions. [...]

[...] I have tried to find out a lot of relevant literature. At the beginning of my researches it was hard for me because I have found out a lot of literature in my native language but not in English. I asked many people around me and then it became easier. Thanks to the help of M. Neshamba who gave me some trusted names of databases. Ethics is a very general topic, and there are no wrong and right ethics, that what I have found out during my research. [...]