Corporate restructuring

Description

"The corporate leaders of the 1960s and 1970s came of age in the Great Depression and served their business apprenticeships in the post-World War II era - a time of stress, uncertainty, and disruption. Not surprisingly, their business strategies were conservative, characterized by a combination of diversification, low debt, and high retained earnings. Although these strategies resulted in redundant assets and excess debt capacity, they served corporations well - and were applauded by investors, analysts, and the business press." "In the 1980s, however, institutional investors increasingly replaced individual investors, creating a dramatic change in the financial environment. Institutional investors lacked the loyalty to any particular organization since they invested in a portfolio of companies and focused purely on returns.^ Accordingly, they had little tolerance for firms with underutilized resources, and insisted - through the market - that firms release them to the shareholders for investment elsewhere. Indeed, many in the financial community felt that an actual or threatened takeover was necessary to compel managers to restructure and become efficient, agreeing that hostile takeovers were the inevitable result." "In Corporate Restructuring: Managing the Change Process from Within, Gordon Donaldson contradicts the conventional wisdom that outside intervention is necessary to compel managers to act, demonstrating that companies can restructure voluntarily. He begins by looking back at previous decades to probe why the successful strategies of earlier decades became such a compelling target of reform in the 1980s. He explains why the financial structure that may have been right in the 1960s and 1970s suddenly became wrong for the 1980s, creating opportunities for corporate raiders.^ Then, drawing on the experiences of twelve well-known public corporations - including Armco, Safeway Stores, and Household International - he shows how firms have implemented radical change through an internal discipline, redefining and redirecting corporate goals, strategy, and structure without external intervention. In detailed case histories of three of these corporations - General Mills, Burlington Northern, and CPC International - Donaldson reveals the process of structural change that each has undergone." "Corporate Restructuring is bound to provoke controversy by challenging much of the financial literature on how firms achieve increased efficiency. Donaldson's evidence demonstrates why and how voluntary restructuring works just as well as - indeed better than - hostile takeovers because it avoids the trauma of external intervention and disruption to day-to-day operations.^ Voluntary restructuring may take longer to achieve the same ends, but it has greater and more universal potential for successful adaptation to change than that which is imposed from the outside. Proposing recommendations for executives and their boards on how to do it, Donaldson throws down a challenge to today's corporate leaders to take control of their own destinies - before someone else does."--BOOK JACKET.

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