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The Center for Audit Quality Gallery on Corporate Governance

Coming to Grips with Prosperity

End of the Honeymoon

“As Dan Yankelovich tells us, the populous began to believe in the New Society and in what was being built by the economic and business communities in the ‘50s and ‘60s. They became convinced that a totally new and totally unprecedented economy had been achieved upon which we could all depend and build. But not only did the public believe in this vision, but business also believed in it. Many of those in the business community became convinced that they had found the ultimate wisdom, that they could do no wrong, that all their ventures would always turn out well.”

March 17, 1980 The Challenges of the New Decade – Address by SEC Chairman Harold Williams to the Providence Journal/Brown University Public Affairs Conference

The post-war decades had been very good for American business, and a new generation of investors had joined in the boom years. By 1966, the number of individuals holding shares in American companies had tripled to nearly 22 million. Tens of millions more held shares through pensions and other funds. Relations between shareholders and management were generally harmonious, and collegial corporate boards rarely contested management decisions.

But corporate growth helped bring the honeymoon to an end. In an era of strong antitrust regulation, corporations seeking expansion found it safest to acquire unrelated businesses, thus creating the famed conglomerates of the 1960s. Before, contests for corporate control usually revolved around proxy contests; in the conglomerate era, surprise cash tender offers were the weapon of choice. Potential acquirers would quietly assemble a substantial block of stock and then make a bid for control by offering high prices during a brief window of time. Between 1948 and 1954, 1,773 companies were acquired by larger entities.¹¹ Between 1960 and 1971, nearly 25,000 takeovers took place, making them an ever-present threat to management.

The SEC had no authority over tender offers, so SEC staff first campaigned for and then materially assisted in drafting legislation to bring them under its purview. In 1968, U.S. Senator Harrison A. Williams, Jr. (D-NJ) helped to enact tender offer reform legislation. The Williams Act required significant disclosure from bidders seeking to acquire control of a company, particularly their identity, intentions and source of funds. It also required them to accept all shares tendered within a 10-day window and to pay the same price to all shareholders. In subsequent years, new SEC rules broadened the scope of the Williams Act.

The Williams Act put the brakes on the use of tender offers to seize corporate control for more than a decade. But it drew the SEC into pitched battles over the boardroom in decades to come.¹²

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Footnotes:

(11) November 20-22, 1957 Particular S.E.C. Merger Considerations – Address by Byron D. Woodside, Director, SEC Division of Corporation Finance to American Management Association.

(12) Williams declared his intentions to the SEC. See September 27, 1965 Letter from U.S. Senator Harrison A. Williams, Jr. to SEC Chairman Manuel F. Cohen.

Related Museum Resources

Papers

April 26, 1957: Letter from Justice Stanley Reed to Justice William Douglas on concentration of economic power
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
April 29, 1957: Letter from Justice William Douglas to Justice Stanley Reed on big and small business
transcript pdf (William O. Douglas Papers, courtesy Library of Congress)
June 10, 1957: Concentration of Economic Power - Address by Justice Stanley Reed to Conference of National Organizations
image pdf (Stanley Forman Reed Collections, courtesy University of Kentucky)
June 12, 1957: Collective Capitalism and Economic Theory - Gardiner Means
transcript pdf (Gardiner Means Papers, courtesy of Franklin Delano Roosevelt Presidential Library)
July 3, 1957: Letter to U.S. Senator John Marshall Butler from Acting SEC Chairman Andrew Downey Orrick on disclosure of stockholders
transcript pdf (Courtesy of National Archives and Records Administration)
November 20-22, 1957: Particular S.E.C. Merger Considerations - Address by Byron Woodside, Director, SEC Division of Corporation Finance to American Management Association
transcript pdf (AICPA Collection, University of Mississippi)
December 5, 1957: Adam Smith's Freedom and Justice - Gardiner C. Means
image pdf (Gardiner Means Papers, courtesy of the Franklin Delano Roosevelt Presidential Library)
August 1, 1958: Letter to U.S. Representative John Burns from John Loomis, SEC with memorandum on mutual fund management fees
transcript pdf (Courtesy of National Archives and Records Administration)
April 2, 1959: Letter to SEC Chairman Edward Gadsby from John Sobieski, California Division of Corporations with rule notice
image pdf (Courtesy of National Archives)
October 15, 1959: The Role of the Accountant in the Restoration and Maintenance of Public Confidence in the Capital Formation Process - Address by SEC Commissioner James Sargent to Hagerstown Chapter, National Association of Accountants
transcript pdf (AICPA Collection, University of Mississippi)
April 19, 1960: Legal Implications of Economic Power - Gardiner C. Means
image pdf (Gardiner Means Papers, courtesy of the Franklin Delano Roosevelt Presidential Library)
January 18, 1962: Business Combinations and Other Financial Reporting Problems - Address by Andrew Barr, SEC Chief Accountant
transcript pdf (AICPA Collection, University of Mississippi)
April 9, 1962: A New Look at Management Responsibility - Adolf Berle
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
January 17, 1964: Letter to U.S. Representative Harley Staggers from G. Keith Funston, New York Stock Exchange on members' connections with non-member business organizations
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
January 23, 1964: Letter from G. Keith Funston, New York Stock Exchange to President Johnson regarding capital gains and dividend taxation
transcript pdf (Courtesy of the Lyndon B. Johnson Library and Museum)
April 16, 1964: Letter to Orval DuBois, SEC From G. Keith Funston, New York Stock Exchange in opposition to proposed changes to financial statements
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
June 17, 1965: Letter to SEC Chairman Manuel Cohen from G. Keith Funston, New York Stock Exchange on response to rumor concerning President Johnson's health
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
June 29, 1965: Letter to President Lyndon Johnson from G. Keith Funston, New York Stock Exchange on results of census of shareowners
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
July 14, 1965: Letter to SEC Chairman Manuel Cohen from G. Keith Funston, New York Stock Exchange with draft handbook for directors
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
September 2, 1965: Acknowledgement to SEC Chairman Manuel Cohen from G. Keith Funston, New York Stock Exchange for comments on draft handbook for directors
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
September 27, 1965: Letter from U.S. Senator Harrison A. Williams, Jr. to SEC Chairman Manuel F. Cohen
image pdf (Government Records)
October 5, 1965: Memo to Irving Pollack, SEC Division of Trading and Markets, from Edmund Worthy on preliminary proxy statements
transcript pdf (Courtesy of National Archives and Records Administration)
October 20, 1965: Letter to SEC Chairman Manuel Cohen from G. Keith Funston, New York Stock Exchange with revised draft handbook for directors
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
November 1965: The Corporate Director and The Investing Public - New York Stock Exchange (Part I Exchange Viewpoints)
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
November 19, 1965: The Changing Economy: Corporations Big and Small - Adolf Berle
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
November 16, 1966: Institutional Investing and the Securities Markets - Remarks of G. Keith Funston, President, New York Stock Exchange
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
January 24, 1967: Economic Power in the United States - Adolf Berle
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
January 26, 1967: The SEC and the Accounting Profession - Yesterday and Today - Address by Andrew Barr, SEC Chief Accountant to Banking, Corporation and Business Law Section of New York State Bar Association
transcript pdf (AICPA Collection, University of Mississippi)
May 16, 1967: An Age of Shareownership - Welcoming Remarks by G. Keith Funston, President, New York Stock Exchange at symposium commemorating 175th anniversary of founding of the Exchange
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
February 20-23, 1968: Address to Kansas City Regional Council on Higher Education - Adolf Berle
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
March 7, 1968: "Some Problems of Disclosure" - Address by SEC Chairman Manuel F. Cohen at the University of Illinois
image pdf (Courtesy of Stephen A. Zeff)
March 19, 1968: Letter to Lewis Gilbert from Charles Wampler, American Telephone & Telegraph regarding shareholder proposals
transcript pdf (Courtesy of National Archives and Records Administration)
March 25, 1968: Corporate Responsibility to the Investing Public - Remarks by Robert Haack, New York Stock Exchange
transcript pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
March 25, 1968: Letter to Joseph Bernstein, SEC Division of Corporation Finance from Lewis Gilbert on proxy rules
transcript pdf (Courtesy of National Archives and Records Administration)
March 25, 1968: Protest to Charles Wampler, American Telephone and Telegraph from Lewis Gilbert
transcript pdf (Courtesy of National Archives and Records Administration)
April 1, 1968: Letter to Lewis Gilbert from Charles Sheppe, SEC on proxy rule amendment
image pdf (Courtesy of National Archives)
April 23, 1968: Corporate Decision-Making and Social Control - Adolf Berle
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
July 12, 1968: Letter to U.S. Senator Harrison Williams from Adolf Berle on pending bill limiting corporate control over stock voting rights
transcript pdf (Adolf A. Berle, Jr. Papers, courtesy Franklin Delano Roosevelt Presidential Library)
October 1, 1968: Letter from Robert M. Bishop, New York Stock Exchange, to SEC Chairman Manuel F. Cohen on tender offer provision
image pdf (Government Records)
October 26, 1968: Some Viewpoints in Corporate Disclosure - Remarks by Robert W. Haack, President, New York Stock Exchange
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)
January 22, 1969: "The Securities Industry and the Realities of 1969" - Remarks of Robert W. Haack, New York Stock Exchange to the 2nd Annual Institutional Investor Conference
image pdf (All rights are owned exclusively by NYSE Euronext copyright 2007 NYSE Euronext, All Rights Reserved, Courtesy New York Stock Exchange Archives)
June 17, 1969: Takeovers and Tenders: A Stock Exchange Viewpoint - Remarks by Robert W. Haack, President, New York Stock Exchange
image pdf (All worldwide intellectual property rights including without limitation moral rights vest in NYSE Euronext and/or its affiliates.)