Hofstra Labor & Employment Law Journal


Allan Kanner


Varieties of aggressive and improper forms of economic activity have existed as threats to civil order since at least biblical times. From this historical perspective, the capacity of some individuals to generate the destructive impact of "merger mania" run amok hardly seems shocking. Yet there is something profoundly threatening to civil order whenever a cabal of conspirators can, in the name of greed or avarice alone, destroy the lives and jobs of tens of thousands of individuals. However, civil society rarely allows itself to fall prey to such misconduct for long. A fundamental tenet of social life is that one may not harm another without some justification or consent. Thus, if an otherwise permissible activity of everyday life gives rise to a harm, the responsible party must still remedy that unjustified harm. Compensation for these harms is the traditional province of tort law. From time to time, government has added or substituted remedies available to the individual. In addition, the underlying harm-creating conduct may be deemed significant enough to warrant government civil or criminal sanctions, but these sanctions are generally additive and do not interfere with the individual's right to pursue a tort compensation remedy. These basic tenets are constantly being reapplied as life in civil society changes - as we move from agrarian to industrial to petrochemical modes of production - and as our understanding of that social life and our roles therein grow. Such changes and growth create new types of harm, which in turn moves the law's development forward. The junk bond funded hostile takeover is perhaps the most shocking economic development in recent times. Although mergers and acquisitions are not new, the potential for harm created by the junk bond is novel. From 1975 to 1980 there were approximately 13,000 mergers and acquisitions, with an estimated value of $175 billion. While the rate of mergers continued unabated during the 1980's, the estimated dollar value rose dramatically. The year 1984 witnessed more than 2,500 deals, worth $122 billion. In 1985, more than 3,000 mergers and acquisitions were announced, with a total value of $180 billion. In 1986, there were more than 4,200 mergers among U.S. firms, involving almost $200 billion. In the first quarter of 1987 alone, 936 mergers and acquisitions were reported, involving almost $32 billion. The magnitude of the adverse impact on workers caused by this merger mania was at first masked by Wall Street's claim that such ravages represented a short-term downturn prior to the emergence of a leaner, meaner and full employment economy. Wall Street asked us to believe that as bad as everything seemed in terms of lost jobs, in reality, everything was really good. As it turned out, Wall Street made money, workers lost jobs, long term investments dried up, research and development began to disappear, and communities suffered.



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