War of the Noses

Business, as every boardroom veteran knows, is an extension of war by more gentlemanly means. When titans collide, the noises of battle rarely escape carpeted corridors, and body counts are concealed in footnotes to the annual report. Today there is a revival of a more visible form of corporate clash: the proxy fight. Already this year, at least a dozen proxy suits have been filed with the Securities and Exchange Commission. At that rate, the alltime record of 21 in 1958 is almost certain to be eclipsed.

Battles are under way for control of Twentieth Century Fox, Universal Container, Ozark Airlines, Midas International and other major companies. In many instances, the attackers are not professional raiders but insiders--men who sold their firms for stock in big companies during the heady 1960s, then watched in dismay as the shares crumbled last year. Perhaps the fiercest fight pits the management of GAF Corp., which makes chemical and photo products, against Former Director Seymour Milstein, his family and friends. Milstein is upset by what he calls poor performance by the men who bought out his Ruberoid Co. in 1967. GAF Chairman Jesse Werner contends that the company is on the road to recovery. The struggle is a classroom case on how to conduct a proxy battle:

LESSON ONE. Acquire a monopoly of firepower. GAF management signed up three of the nation's four big proxy solicitation firms, which make battle plans as well as send out proxy statements, including by far the largest, Georgeson & Co. With its in-house computer, the only one in the business, Georgeson can tabulate signed proxy statements as they come in and quickly shift its attack to the proper flank. If support appears to be weak in, say, Western Ohio, the machine can print out a list of stockholders from that area for telephone canvassers to work on. Some 500 to 600 professional solicitors, lawyers and public relations advisers are involved on both sides of the GAP struggle.

LESSON TWO. Engage the enemy far from your trench line. In the freewheeling 1950s intelligent managements sought to keep their lists of stockholders out of dissidents' hands as long as possible. Rather than use a series of expensive legal obstacles, GAP declined to furnish the challengers with the computer tape of the list and made them copy it by hand.

LESSON THREE. Fight dirty. In screaming, full-page newspaper ads and proxy mailings, Milstein's faction has accused the management of setting up a stock-option plan that became a "grab bag" for senior officers, and of using $600,000 of company funds to solicit proxies to re-elect itself. The company has retaliated with allegations that one of the challengers is a director of a firm in competition with GAP, that another bought his first 100 shares of stock only a few weeks ago, and that Milstein "has not been employed in a full-time job since December 1967." GAP management says that the Milstein faction is spending $750,000 to gain control of the company.

The proxy count will not be completed until the end of this week or later. Many fight fans are willing to wager that even bigger proxy wars are ahead. There are reports in Wall Street that the next target will be a billion-dollar-a-year company that has more than 200,000 shareholders.

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