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Fair but not square

20 October 2016 By John Foley

Victors are finding it harder to claim their spoils. American presidential hopeful Donald Trump, pro-Europe campaigners and Britons who live near airports are kicking up a fuss when things threaten not to go their way. Companies already know how to deal with such problems, but in the wider world, it’s harder and more costly.

Having already called the U.S. election rigged, Trump said at a debate on Wednesday that he couldn’t yet say whether he would accept the result of the ballot in November. Similarly, many of the 48 percent of UK voters who opted to stay in the European Union are disputing the outcome of June’s referendum. Brexit challenges range from the legal to the moral. Some reject a divorce that’s too “hard”, while others point out that pro-leave campaigners fudged the facts. Both objections question the finality of the actual outcome.

Democracy is already a flexible concept in finance. Hedge funds with only tiny stakes increasingly find ways to bump up the value of deals accepted by the majority of shareholders, as occurred with Anheuser-Busch InBev’s $97 billion acquisition of SABMiller. Minority owners even have blocked takeovers other owners might welcome.

Money often fixes the problem. People who live in the flight path of Heathrow Airport, which the UK government has been talking about expanding for a quarter century, are calling not for systemic change but rather to move the plan elsewhere or for compensation over lost quality of life. In other words, at some level they have a price. Finding it becomes harder, however, as societies get richer. How much is a night’s sleep worth?

In reality, Trump’s popularity and the Brexit vote are indications that large minorities already have been disregarded. That explains British Prime Minister Theresa May’s insistence that new policies work for everyone and Hillary Clinton’s openness to more progressive ideas from the likes of Senators Bernie Sanders and Elizabeth Warren. The outnumbered can be managed, and even paid off. In politics as in finance, however, they can no longer be counted on to go quietly.

This item has been changed to correct the value of the SABMiller deal mentioned in paragraph three to $97 billion from $87 billion.


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