Saturday, November 14, 2009

Sam Heyman: No Gin Rummy for Him

I always thought Sam Heyman, who died on Nov. 7 at age 70, got a bad rap when he was lumped in with all the other quick-buck takeover artists roaming the land in the 1980s. The New York Times called him a "corporate raider" in its obit but got it closer to the truth when it noted that he "preferred to hold on to the companies that he bought and run them rather than sell them for a quick profit."

Mr. Heyman was not a happy man when I published him in 1986. I opened up the pages of Directors & Boards for him to rail against the slapdash restructuring being done by many CEOs in the mid-'80s. He was suspicious that much of this restructuring was being done "to perpetuate entrenched managements." I titled his article "A Nation of Gin Rummy Managers" — his term for managers who were "discarding their least attractive asset at every turn" without giving the right kind of thought to the future potential of these operations and taking the hard actions to make them profitable.

One of his critiques has resonance to today's retrenchment environment, in the way companies are handling employee layoffs. Heyman worried that the layoffs that came with all the restructurings in the '80s would "deprive these companies of their brightest and ablest executives." He suggested this:

"We must adopt instead a surgical, rather than sledgehammer, approach to employee cutbacks so as to ensure that these programs serve not only to reduce costs but to permit management the latitude to choose for itself between those it wishes to retain and the nonperformers who must be weeded out in any process of this sort. This approach will surely require that managements have intimate knowledge of their organizations and people, that decisions be made strictly on the basis of performance, and that companies assume what inevitably will be some litigation risks. But by addressing the issue in a thoughtful, carefully conceived manner, companies can avoid the otherwise disastrous consequences for the future of their organizations."

Thoughtful is indeed the approach he took with GAF Corp., the company he won in a historic proxy fight in 1983 and proceeded to reinvigorate without resorting to the slash and burn techniques of other notorious restructurers, both those operating inside the corporate walls as well as those banging at the gates on the outside. Up until recently he still held the title of chairman of GAF Corp. — now that's a long-term holding.

His legacy lives on in the governance field with the Samuel and Ronnie Heyman Center on Corporate Governance, which was founded at the Benjamin N. Cardozo School of Law in 1987, shortly after his article appeared in Directors & Boards.

[Portrait illustration accompanied his 1986 article]