Investor Group Sides With Ousted Board Member : Big Holders Grill GM on Perot Buyout
A group of institutional investors holding more than 7 million shares of General Motors stock demanded Wednesday that GM explain further its $700-million buyout of Texas billionaire H. Ross Perot and his ouster from the GM board.
“GM has a lot of explaining to do,” said Harrison Goldin, the New York City comptroller and co-chairman of the investor group. “We want to know why the best thing that happened to General Motors since Frigidaire has been ridden out of town on a rail.”
The group--the Council of Institutional Investors, which includes officials who control $175 billion in state and local government pension funds--heard from some GM top executives and from Perot.
Goldin, spokesman for the investors, made it plain afterwards that the group sides with Perot and added that he was “distressed” that Roger B. Smith, GM’s chairman and chief executive, refused at the last moment Wednesday to explain in person GM’s action to the council.
On Dec. 1, Perot put his huge buyout profits in an escrow account for two weeks, saying he was giving GM management and directors time to reconsider what he said he regards as a seriously flawed decision to buy his stock and oust him.
If the investor group succeeds in pressing GM to change its mind, Perot told reporters, “I’ll try to follow their wishes.”
The GM executives contended Wednesday that Perot was bought out for “a slight premium” that they valued at $1.50 a share, or about $18 million. However, published accounts of the buyout, with which Perot said Wednesday he agrees, said he was paid $56.50 a share for 11.4 million shares of GM Class E stock, then valued in the market at $31.375 a share.
The GM officials also claimed that Perot “flouted accepted standards of corporate governance,” accused him of “an intolerable degree of unaccountability” and said he refused to allow outside audits of GM’s Electronic Data Systems Corp., which Perot founded and ran until the Dec. 1 buyout.
Elmer Johnson, GM general counsel, scoffed at Perot’s assertion that he was upset by the size of the buyout, declaring that Perot “never objected morally to the slightest degree. He showed not an iota of concern until he got his hands on the money.”
Goldin noted pointedly that the 30 or so pension funds represented by the council own more than 6 million shares of GM common stock and more than 1 million shares of Class E stock.
“We are the owners, and we have a right to get a hearing from the CEO,” he said.
“We want to ask Mr. Smith why it is that they choose to buy out their biggest stockholder and most able board member because they thought he was disruptive and irritating and didn’t fit in with their corporate culture,” Goldin said.
“Their corporate culture ought to be to make money for their shareholders, not to be clubby enough to fit into GM board rooms.”
Asked if the group is contemplating a proxy fight to force a change in management policy, Goldin replied carefully. “We intend to be orderly,” he said. “The next step is to meet with the chairman and present our grievances and hear what he plans for the company in the next 12, 24, 48 months.”
But then he added: “When you have this number of shares, I’ve found companies are responsive--even companies like General Motors. We are serious, and we propose to pursue this issue relentlessly. . . . We are determined to act.”
