I was general counsel of Arvin Industries in the 1980s when a group of Indiana companies and lawyers joined in the successful effort to encourage the Indiana General Assembly to enact (unanimously) what has become known as the Indiana anti-takeover law. The measure includes the specific responsibility of boards of directors to consider the community impact of a proposed business combination as part of its exercise of business judgment.
I was chairman and CEO of Arvin at the time of the Arvin-Meritor Automotive Inc. merger in 2000. I can assure you that the so called “soft issues” referenced in your editorial [Anthem must keep city in focus, July 13], including community and employee impact, were fully discussed, negotiated and memorialized in the merger agreement. Among those provisions was a succession plan, which called for me to initially become president and COO of the merged company but then to become chairman and CEO within two years. It was well known to the parties that it was my intent to return the corporate headquarters to Columbus and Indiana, its state of incorporation, upon becoming CEO.
We all know this didn’t happen. The lesson here is that even a fully negotiated merger agreement is often overridden after closing by the board and management of the merged entity. The enforcement mechanism of merger agreements is quite weak, and the same business judgment rule that protects boards generally gives them great latitude to override the terms of the agreement. I should add that legitimate business exigencies, including disputes among senior management, which we had experienced, often require boards to take such actions.
I take full responsibility for not protecting the interests of Arvin’s dedicated employees and our committed communities. There is no question that the loss of a corporate headquarters has a substantial adverse impact on a community. This was somewhat mitigated by the full funding of the Arvin Foundation, which has continued the support of community initiatives in the Columbus area. Although initially protected by the terms of the merger agreement, many of the individuals employed in our corporate headquarters eventually suffered the loss of jobs or opportunities, for which I am deeply sorry.
As to the claim that “thousands of jobs were lost in south-central Indiana,” I must take partial exception. While all the businesses that formed Arvin and had operations in Indiana at the time of the merger were sold by ArvinMeritor Inc. within a few years of the merger, the buyers of those businesses operated them both in place and rationally given the pressures of automotive-industry price concessions and off-shoring of manufacturing operations. The largest of those businesses is now part of Faurecia, which is growing in Columbus and has recently announced an even deeper relationship with Cummins.
There would have been major changes within those businesses no matter who managed the company. And while those changes might have been different under different management, most were dictated by economic realities, including the Great Recession.
In closing, I largely concur with your conclusion that the “nitty-gritty details of a deal can make all the difference to a community.” The “nitty-grittiest” detail is the selection of the CEO at the date of merger. From that decision most of the consequences flow.
Finally, as much as I wish for one, there are seldom “do-overs” in business, and I will carry with me always the burden of knowing that I let the Arvin communities and employees down. We were a great company because of their commitment, and I hoped I could transfer their commitment to the merged company.
I sincerely hope Anthem remains an “anchor tenant” in the Indiana business community.•
Hunt, chairman of Hunt Capital Partners in Indianapolis, was an Arvin Industries executive for more than 20 years.