Conflict of Interest

So what's the most dramatic piece of this puzzle in which I've been trying to interest you this week?

Why should we pay attention especially to the proxy fight over Grubb & Ellis at today's shareholders meeting?

It features a dandy conflict-of-interest charge.

The playbook sometimes calls for the incumbent management to say, "shareholders, please don't vote for the challengers. They, or some of them, or the leader of the gang, owns interests in other companies which have interests that compete with yours and our. If they take over this company, they'll end up running it for the benefit of those competing interests, at your expense."

The charge in this case, as made by the incumbents, is that "Anthony Thompson is attempting to take control of Grubb & Ellis and install Stuart Tanz as CEO with the intention to cause Grubb & Ellis to buy or absorb Thompson's newly formed company, Thompson National Properties, a direct competitor."

Thompson's answer is that the two companies aren't direct competitors. They're both real-estate related but that phrase covers a wide range of actual operations.

As Thompson describes TNP, it is more a customer of G&E than a competitor, having purchased 3 buildings from them in 2008.

What about the claim that Thompson wants G&E to purchase TNP?

Thompson and his slate scoff at this, too. Even if they win the election today, they'll have at most three seats out of the eight, so they couldn't push through such a decision by themselves.

Also, Thompson owns a 14% stake in G&E. So, he asks, why would he press actions that would undermine the value of that stake?

One could speculate about responses to such points. After all:

(1) customers are sometimes also the competitors of their suppliers.
(2) even a consistent customer-supplier relationship could generate conflicts of interest. Conceivably, TNP could want to buy G&E to so arrange things that it could thereafter pay lower commissions when it buys buildings [just a hypothetical off the top of my head folks -- in other words, I just made it up!] but
(3) Thompson could for all I know be angling to have G&E buy TNP at an inflated price regardless of what their relationship to each other has lately been -- and could reckon that his gain on one side of that deal would exceed his loss at the other, and
(4) A three vote block on an eight member board is a formidable one, especially if the other five aren't a cohesive block themselves.

And so forth. Round and round the mulberry bush we could go.

Let's wait and see who wins this one.