Abstract
The recent takeover and merger trend cries out for ethical evaluation. This essay proposes a model for evaluating them in terms of their impact on a firm's immediate stakeholders: investors, owners, management and employees. Since mergers and takeovers are ‘Transfers of Ownership of Firms’ (TOFs) they entail a property ethic of ownership, control, securing stakeholder interests, and defining which stakeholders should exercise these rights. I use the model to evaluate two fictional cases, a friendly merger and a hostile takeover. The results show that neither TOF serves all interests equitably. Since the control structure of the private firm is legitimized by its interest structure, I reason that both should be reformed. Both rest on a broader economic rationale; but it is controverted. Accordingly, the economic and ethical evaluation of TOFs, I conclude, both entail the democratic reform of the control structure of the firm.
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