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April 23, 2009

Hostile takeovers

I learned this morning about Aware, an organization acting as advocates for a gender equality in Singapore. From the little that I saw on their positions, they are similar to NOW and other similar organizations here in the America, that is governed from a generally left of center ideological perspective.

It seems that recently that changed. A group of about 80 members of a conservative Christian church joined the organization and then took over all the committees and sub-committees. Only the new president represented the old-guard, and she resigned a few days later. You can read more details at WHAT HAPPENED over at Save Aware

Which is all sad for the old members and happy for the new ones, who cheaply took over an established lobbying and good works organization. As a financial economist, I'm curious why this doesn't happen more often. The NRA has way more members (4 million) than than the Brady Campaign to Prevent Gun Violence (1.7 million in dues at $25 dollars in dues is 68,000 members). Why haven't they showed up en mass to join the Brady organization and shut it down with a major contribution to the NRA of money and strategy documents and then firing all its employees?

Corporate takeovers used to be pretty common, it was only when states changed their corporate laws to allow a variety of anti-takeover measures (poison pills, staggered board of directors, golden parachutes, and dead hand rules) that they became more rare. I'm not sure that non-profits are constrained by the fiduciary duty the prevents the most extreme anti-takeover measures. Non-profits may be able to pass anti-takeover rules without the concern faced by corporate boards that doing so prevents the firm from fetching the highest price.

I few thousand highly motivated and united people of even modest means could take over practically any major non-profit with a voting membership and bend it to their policy ends. When you consider the massive endowments and other assets of these organizations, this could be far more valuable than the money that group could raise on their own. I think you'd have to strike in rapid succession because after a short period you'd see anti-takeover policies snapping into place.

Posted by OneEyedMan at April 23, 2009 6:38 AM

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