Sunday, April 20, 2003

One last thing from Friday's New York Times -- I found this in the business section:

THINGS are looking up for the Perini Corporation, a major construction company. "The last three years we had very good income," said Robert Band, the company's president. This month Perini was one of the first companies to get a government contract for work in Iraq, which could be worth $100 million. The company's common stock is up 38 percent this month.

But things are not quite so upbeat for investors who own Perini's preferred stock. It has not paid dividends for seven years, and although Perini now has ample profits, and pays management incentive bonuses that dwarf the annual dividend that accrues each year, the board has served notice it has no intention of ever paying.

To the directors, this is a simple issue: They don't have to pay, and they won't. In seeking dismissal of a shareholder suit filed in federal court in Boston, they contend that directors owe no fiduciary duty to any shareholders, and certainly not to the preferred ones. "Corporate directors have a fiduciary duty to act in the best interests of the corporation," they argue. "Directors' duties toward the corporation, however, do not generally encompass a duty to the company's shareholders."

The company won an earlier case filed by preferred shareholders in New York. In that case, the company persuaded the judge that plaintiffs had no right to rely on an explanation of their rights contained in the original 1987 prospectus because it referred investors to a different document, not included in the prospectus, which had different — and less favorable — terms....

OK -- these guys aren't cheating people out of their life savings, but that last bit in partcular is rather sleazy. Are only sleazebags going to get Iraq construction contracts?

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