Westinghouse acts to benefit shareholders Takeover now easier

outsiders gain clout

December 04, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- The Westinghouse Electric Corp. became the latest company to increase its accountability to shareholders when the troubled company's board voted yesterday to increase the power of outside directors and to make a takeover of the company easier.

Wall Street analysts said the board's decision did not signal that the company was up for sale -- though a sale would be easier under the new rules -- but indicated that it was looking for shareholder support as it embarked on a radical restructuring plan that has seen it shed thousands of jobs.

"They want the shareholders on their side and so are giving them what they want. Some had been very vocal in criticizing the board," said Judy A. Meehan, of Parker/Hunter Inc., a Pittsburgh brokerage.

The scrapped anti-takeover provision, known as a "poison pill," made hostile takeovers virtually impossible by doubling the number of outstanding shares when a corporate raider started to attack. Although they can protect a company from being gutted by a raider, poison pills have been unpopular with shareholders because they depress stock prices by discouraging large stock purchases.

The board also increased the power of outside directors by creating a governing committee composed of outside directors and reaffirming that its executive pay committee would be run by outsiders.

In addition, the company said its board decided all directors should be elected annually after the current directors' terms expire and that voting should be by secret ballot.

"It's clearly positive. We're really happy," said Richard Copes, a spokesman for the California Public Employees Retirement System (Calpers), which owns about 1 percent of Westinghouse stock.

Mr. Copes said Calpers had been able to meet with Westinghouse management for the first time yesterday and felt that they were becoming more responsive.

The Westinghouse board's steps came as directors and shareholders across America become more assertive as they tire of well-paid, aloof managers presiding over troubled companies. the past, boards, charged with overseeing management in the interest of shareholders, were largely dominated by members of that management.

This year, the board of General Motors Corp. forced the company's top executive to step down as the automaker continued to lose money. But Westinghouse's board did not go that far yesterday, reconfirming its unanimous support for Chief Executive Officer Paul E. Lego.

Mr. Lego said the changes were part of company's long-term plan to turn its fortunes around.

"The Westinghouse board of directors and the newly organized management team are committed to rebuilding the value of Westinghouse for its shareholders. It is our top priority," Mr. Lego said in a statement.

Westinghouse has more than 100,000 employees nationwide, including 12,000 in Linthicum, at its Electronic Systems Group. About 1,000 employees in Maryland are due to lose their jobs as part of Westinghouse's cutbacks.

The Pittsburgh-based company announced last week that it would pare 23,000 employees by selling its financial services unit and four other businesses and cut its dividend by 44 percent to 40 cents a year.

The stock closed yesterday at $13.125, up 25 cents, with 1.5 million shares trading. The stock has risen $3 since the restructuring plan was announced last week.

Although Wall Street has welcomed Westinghouse's move to concentrate on its electronics business, shareholders were likely miffed at losing part of their dividend, an analyst said, making yesterday's decision all the more necessary.

The board's decision to dump the poison pill provisions was also seen as largely risk-free because there is little likelihood that a buyer would surface for the troubled company. A controlling interest in Westinghouse, which lost more than $1 billion last year, would likely cost between $6 billion and $8 billion.

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