By Matt Orsagh, CFA, CIPM
- In 2009 the company needed to retire a loan from a major shareholder.
- The company tried a merger but was rebuffed by a negative fairness opinion by Barclays.
- The company tried to offer minority shareowners the ability to trade in their shares for preferred shares at terms similar to the deal Barclays had deemed unfair to minority shareowners.
For its part, Revlon then took some less than ethical steps to get its way:
- The cosmetics conglomerate devised a plan to keep its independent directors and its own 401(k) plan participants in the dark about any future fairness opinions offered by independent advisers.
- Therefore, independent directors eventually recommended the deal, not knowing all along that the 401(k) trustee had requested and received a fairness opinion that recommended — just like the earlier Barclays opinion — that the deal was not fair to minority shareowners.
Fast forward to this year. After much litigation by shareowners, to the tune of over $30 million paid to aggrieved investors by Revlon, the SEC gave the company a gentle pat on the wrist in reaching an $850,000 settlement with the makeup manufacturer.
Is this justice? Did the board of Revlon adequately fulfill its fiduciary duty to shareowners? What do you think?
To learn more about the case and what boards should do in similar situations, listen to an interview with Broc Romanek of TheCorproateCounsel.net.
Disclaimer: Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.