'The agency model’s extreme version of shareholder centricity is flawed in its assumptions, confused as a matter of law, and damaging in practice.'
Allergan for nearly 17 years in April 2014, when Valeant Pharmaceuticals and Pershing Square Capital Management initiated the hostile takeover bid described in the accompanying article “The Error at the Heart of Corporate Leadership.” He was the company’s sole representative during the takeover discussions. When it became clear that the bid could not be fended off indefinitely, Pyott, with his board’s blessing, negotiated a deal whereby Allergan would be acquired by Actavis .
Permit me a naive question: Since Allergan was going strong, why did it make sense to Valeant/Pershing Square to take you over and strip you down? I get that they’d make a lot of money, but wouldn’t fostering continued growth make more in the long run? Another thing that surprised and disappointed me was that I couldn’t get people who supported what we were doing—who understood why we were not accepting the bid, which grossly undervalued the company—to talk to the press. Several people said they would, but then folks at the top of their companies said no. And the reporters who cover M&A don’t know the companies well. The people who cover pharma are deeply knowledgeable—but once a company is in play, those guys are off the story day-to-day.
I don’t believe that strong performance and purpose are at odds, not at all. My own experience tells me that in order for a company to be a really high performer, it needs to have a purpose. Money matters to employees up to a point, but they want to believe they’re working on something that improves people’s lives. I’ve also found that employees respond really favorably when management commits to responsible social behavior.
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