“GIVING TEETH TO THE POWERS OF SINGAPORE DIRECTORS IN UNSOLICITED TAKEOVERS IN LIGHT OF SHAREHOLDER SHORTTERMISM”

Abstract

The issues of shareholder short-termism, especially on the part of both retail and institutional investors, have caused much furore in the United Kingdom in the wake of the Kraft-Cadbury Takeover in 2011. This was especially so after Kraft reneged on its initial promise to the Cadbury’s board of directors that it would honour the employment contracts of 400 of Cadbury’s pre-existing Somerdale employees. This also raised a great deal of hue-and-cry as regards the long-term interests of Cadbury, as well as that of the remaining shareholding body that was left to its devices when the short-term investors cashed out from Cadbury. This thesis argues that directors of the target board should be given teeth to ensure that the long-term interests of the company and that of its entire shareholding body are bothconsidered and protected, especially in the context of unsolicited takeovers of public-listed companies in Singapore. Target directors should also be allowed to consider the impact of unsolicited takeovers on non-shareholding constituencies such as the employees of the target company. This thesis proposes re-calibrating Singapore’s present shareholder-primacy model, by including in the Companies Act and Takeover Code, a provision mandating target directors to prioritize the company’s long-term interests over its short-term interests when it seeks to discharge its fiduciary duties to the company in the face of an impending unsolicited takeover.