newjerseynewsroom.com

BY MURRAY SABRIN

COMMENTARY

Let’s say you are the CEO of ABC Inc. and you want to merge with XYZ Inc., because you believe it will provide great synergies for both companies. XYZ has $600 million in debt. You go to your board of directors for approval, and they ask you how much it will cost to merge XYZ into ABC. You say, “Trust me, the numbers will be forthcoming but we have to get this done by July 1.”

What should ABC board directors do? Give the CEO carte blanche for the merger or tell him to come back with numbers so they can assess the efficacy of the merger? There are more questions to ask, but for now the question is, would ABC board members be fulfilling their fiduciary duties to shareholders if they agree to the merger? To ask the question is to answer it.

If ABC board members approve the merge without having all the relevant data, they would have their collective tukases—a technical term—sued by shareholders, bond holders and other stakeholders for violating their legal obligations to all parties.

Members of the New Jersey state legislature and trustees of the proposed merged universities are in the same situation. For state legislators to approve of the Rutgers University merger with UMDNJ and the transfer of Rutgers–Camden to Rowan University without data on the cost of the merger and transfer is the height of irresponsibility.

Members of the state legislature should not vote for what smacks of cronyism at its worst, is an insult to New Jersey taxpayers, the students, the faculty and staff at all the institutions involved, and makes a mockery of what is left of good governance in Trenton.

Any Republican who votes for this travesty will forever lose any credibility as a fiscal conservative and steward of the taxpayers’ hard earned money. Democrats who vote for the merger and takeover would reveal they are nothing but puppets of the political bosses in Trenton and around the state.

Now is the time for legislators on both sides of the aisle to join in a bipartisan effort to just say no to cronyism and fiscal irresponsibility.

Murray Sabrin is professor of finance at Ramapo College and blogs at www.MurraySabrin.com.

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