Frank W. Bubb is a corporate securities lawyer residing in Swarthmore, Pennsylvania.
A free market for corporate control tends to protect shareholders and promote economic health.
“I think it is time for Congress to send a clear signal to corporate America that we will no longer tolerate un-restrained warfare between top managements for control of corporate assets,” said Representative Peter Rodino (D-N J). “They [hostile corporate takeovers] do not create jobs. They do not add to the national wealth. They merely rearrange ownership interests and shift risk from shareholders to creditors,” according to Martin Lipton, a Wall Street attorney specializing in takeover defense.
As the wave of highly publicized mergers, acquisitions, buyouts, and divestitures soared to new records in 1984 and 1985, reactions like these became commonplace. Even Forbes magazine headlined a feature article on the subject with the following: “As the American economic environment changed, predators emerged from under rocks and began to prey on healthy businesses. Is there no stopping them? Will they devour us all?”
In 1985, some 50 bills were introduced in Congress to regulate corporate acquisitions, primarily to protect target companies. Among other things, such bills would:
• impose additional requirements on tender offerers;
• give the independent (non-employee) directors of a target company the right to veto a tender offer or the acquisition of a controlling interest, subject to reversal by a shareholder vote;
• require tender offerers to file “community impact statements”;
• prohibit open market purchases by one corporation of more than 20 per cent of another’s stock;
• deny successful acquirers a tax deduction for interest on debt incurred to finance their acquisitions.
Although none of the 50 bills made it out of committee, legislative pressure to protect corporations from hostile takeovers will undoubtedly continue.
Important Principles at Stake
Through the sensationalism that has surrounded the wave of corporate deals, two important principles have received too little attention: (1) hostile corporate acquisitions play a crucial role in preserving the private property rights of shareholders, helping to maintain large corporations as private—rather than quasi- governmental—institutions, and (2) the ability freely to trade businesses, not just goods and services, is an integral part of the right to private property.
In addition, a free market for corporate control and a free market for ongoing businesses are both vital to a society’s economic health. Both tend continually to reshuffle assets into the hands of those who can manage them more efficiently.
In their 1932 classic, The Modern Corporation and Private Property, Adolph Berle and Gardiner Means observed that control of large, widely owned corporations was becoming separated from their ownership. When a corporation’s ownership is dispersed among a large number of shareholders, its current managers usually have effective control because they can use the corporate election process to perpetuate their position.
The dispersion of corporate ownership gives rise to a classic “free rider” problem. If a corporation’s managers are not acting in the best interests of its owners, each shareholder has an interest in replacing them. Yet the costs to each shareholder of communicating with other shareholders, or of becoming adequately informed about issues presented by other shareholders, are substantial. In most cases, they are so high in comparison to a given shareholder’s expected gain from acting that it is virtually impossible for shareholders to act in concert to oust incumbent managers.
There are solid economic reasons why the separation of ownership and control evolved during the first part of this century and continues to flourish. It permits a division of labor between investors and managers: a person can invest in an enterprise without bringing along the ability or desire to manage it, and a talented person can manage a large organization without being wealthy enough to own it. Unbundling investment capital from management skills also permits investors to reduce their risk by diversifying investments.
However, the separation of ownership and control creates two sorts of risks: (1) managers may act in their own interests as opposed to those of the firm’s owners, and (2) incompetent managers may remain in charge, even though it would be in the interests of the owners to hire new ones. These problems are not insignificant. In the extreme case, if shareholders had no control over the firms they own, their property rights as shareowners would be expropriated, as it were, by self-perpetuating oligarchies.
Economically, giving hired managers unfettered control over assets they do not own would lead to some combination of two unpleasant alternatives: (1) the economy would be populated by lethargic behemoths akin to the “firms” of a socialist economy, run by well-paid insulated managements with little personal stake in the firms’ performance or (2) people would simply refuse to invest in corporations, thereby eliminating the potentially huge economic benefits of letting investors not manage and letting managers not invest.
Politically, the prospect of huge blocs of productive assets in the hands of self-perpetuating groups accountable to no one would lead inevitably to making such groups accountable to the “public,” i.e., the government. Demands for this sort of solution were heard frequently as late as a few years ago, when Ralph Nader’s “corporate accountability” movement sought to require Federal incorporation as a means of regulating the internal workings of large corporations. We know this system by another name: fascism. It has not been noted for its success.
The critical question is this: How can the rules be structured to capture the benefits of separating ownership from control without suffering its disadvantages? How can managers be given the incentive to act in the interests of shareholders?
This question underlies most of the development of corporate law, especially since the time of Berle and Means. The law and most legal scholars have given two answers: impose certain “fiduciary duties” on corporate managers, and implement “shareholder democracy” through rules governing the solicitation of proxies.
Unfortunately, while the imposition of fiduciary duties is able to prevent most overt conflicts of interest, it is almost totally unable to prevent management incompetence. And as Joseph Flom, a New York takeover attorney, said at a recent Corporate Counsel Institute meeting, the notion that proxy contests can discipline management is “off the wall.” A proxy contest for control of a large corporation costs between $5 and $10 million. Without an enormous investment in stock, he reasoned, there is no motivation to mount a challenge to incumbent management. “It is an ineffective, costly way that is beyond the reach of most stockholders.” There is no better proof of the unworkability of shareholder democracy than the almost total absence of proxy contests in corporate America.
The “Market for Corporate Control”
While legal scholars and jurists were busy pursuing the blind alley of rules and regulations, a far more effective way of aligning management with shareholder interests evolved, unbidden, out of the marketplace. During the 1960s, the “market for corporate control” sprang on corporate America with the advent of the hostile takeover bid.
No planner sat down in advance and said, “let’s make managers bid for the privilege of managing assets owned by others,” but that is how the process works. If someone thinks he can manage a corporation better than its current managers, he can offer to buy out some or all of its shareholders at a premium over the current market price.
Note how this mechanism solves the free rider problem described above. Instead of attempting to mount an expensive, time consuming challenge on his own or wading through reams of boilerplate to ascertain which of two groups of proxy contestants is better qualified to run the corporation, each shareholder is now confronted with a much simpler choice: Am I better off with what I’ve got or with what the bidder is offering me? Just as market prices operate as “aids to the mind,” to use Ludwig von Mises’ phrase, by conveying huge quantities of information in a simple form, a bidder’s offer is his most effective way of communicating with the target firm’s shareholders.
How can incumbent management maintain control? By doing a good enough job that investors drive the corporation’s stock price higher than any potentially competing group of managers would pay. The price of the corporation’s stock is management’s ongoing bid for the privilege of continuing to run it.
In the last couple of years, the market has developed a second way for incumbent managers to bid: the leveraged buyout. If managers facing an actual or potential challenge think they can outperform the challengers, but if the market (as reflected by the price of the company’s shares) doesn’t agree, they are free to outbid the challengers for ownership of the company—if they can raise sufficient funds from lenders and other equity investors.
While potential challengers are not infallible, their actions tend to be economically rational because they face the same economic constraints as incumbent managers. Except for the handful of wealthy individuals who play the takeover game, challengers are also corporate managers. If they make an improvidently high offer for another company, the price of their own company’s stock will tend to fall.
In sum, the prospect of having their corporations yanked out from under them provides incumbent managers with a powerful, direct incentive to maximize returns to shareholders. It has often been noted, even before the market for corporate control evolved, that managers are affected by the price of their corporation’s stock. The lower a corporation’s stock price, the more costly it is to raise equity capital. The less equity capital a corporation has raised, the less it can support a given level of debt. Therefore, poor management effectively limits a corporation’s growth. In addition, management compensation is often tied to the price of the corporation’s stock through the issuance of stock options. However, for managers willing to be big fish in a small pond and to compensate themselves other than through stock options (not a difficult task!), a low stock price, by itself, is not a strong incentive to act in the interests of shareholders.
A common objection to the recent wave of corporate takeover battles is that they divert management from running the business. “Rather than planning new products or considering new markets, many executives are spending their time looking around at whom they might take over or who may try to take them over.”
This objection is just one step more sophisticated than the old socialist slogan, “production for use, not profit.” It is based on the implicit assumption that value is created only by activities directly related to the production and distribution of goods and services. It does not grasp the importance of activities which tend to allocate capital to higher-value uses. Since the market for corporate control tends to move assets into the hands of those who can manage them more efficiently, the “diversion” of management effort is no diversion at all, but an input for a highly productive process.
Another objection to corporate takeover battles is that they divert bank loans and other capital from productive activities. This objection seems to assume that money lent to finance a takeover is sucked into a black hole. In fact, the money is paid out to shareholders who use it to make other investments or to repay loans.
While this discussion shows the importance of a free market for corporate control, it is not meant to endorse all the specific tactics employed by hostile acquirers or to condemn the tactics employed by defending managements. Such tactics (invariably termed “abusive” by opponents), which often relate to the treatment of non-tendering shareholders after a successful takeover, involve complicated legal and moral issues well beyond the scope of this article.
The Restructuring of Corporate America
Hostile takeovers to replace incompetent managers or to spur greater management efficiency are only part of a much larger picture. Even hostile takeovers of well-run enterprises perform other valuable functions to enhance shareholder returns and promote economic efficiency. It is possible that a corporation’s incumbent managers are the most efficient managers of its particular bundle of assets and liabilities, but that such managers could be outbid for control of the corporation by people who realize that:
• the assets would be worth more if they were transferred to another corporation, perhaps because such a transfer would result in economies of scale;
• the assets would be worth more in total if some were split off, either to be merged into other firms or to be managed as smaller firms by people with more expertise in that “niche” and more incentive because they can be given a larger personal stake in a small firm;
• the assets would be worth more if some parts of the business were shut down, enabling management to concentrate on the rest;
• the assets include a disproportionate amount of cash, which could be used more efficiently if it were transferred to the shareholders through dividends or share repurchases;
• the corporation could reduce its tax bill by issuing tax deductible debt to retire shares.
In addition, hostile takeovers are a relatively small part of the total “corporate restructuring” picture. The vast majority of mergers, acquisitions, buyouts and divestitures occur in nominally “friendly” transactions, either because managements are acting on their own to maximize shareholder returns or because they fear that a hostile acquirer will implement an obviously sensible restructuring.
The restructuring of corporate America has two basic components, both of which are often part of the same transaction: (1) reshuffling assets into more efficient combinations, and (2) increasing the ratio of debt to equity on corporate balance sheets.
A record $180 billion of mergers, acquisitions, buyouts and divestitures occurred in 1985, easily topping the previous record of $122 billion set in 1984. Firms acquired in 1985 included such corporate giants as General Foods, Shell Oil, Hughes Aircraft, Signal, Nabisco Brands, American Hospital Supply, American Broadcasting, Carnation, G.D. Searle, American Natural Resources, Houston Natural Gas and Revlon. The trend has rolled on into 1986 with General Electric’s acquisition of RCA.
The steady drumbeat of mega-deal announcements seems to have created the impression that all of corporate America is about to be swallowed up into a handful of super-conglomerates. This view, implied by scare stories in much of the popular press, is distressingly wide of the mark.
In fact, the past few years have witnessed an unprecedented phenomenon: a “riot of voluntary restructuring” and the creation of “a giant auction market in which almost every dollar of corporate assets seems to be on the block.” The most significant fact about this entire trend is that fully one-third of all inter-corporate transactions are divestitures.
Among the largest are General Electric’s sale of Utah International; R.J. Reynolds’ sale of Aminoil; RCA’s sale of CIT Financial; Texaco’s sale of Employers Reinsurance; Gulf & Western’s sale of several businesses, including Simmons and Kayser-Roth; United Technologies’ sale of Inmont; City Investing’s divestiture of Uarco, Rheem Manufacturing, World Color Press and Motel 6; ITT’s sale of numerous businesses, including Continental Baking; and Continental Group’s sale of most of its containerboard and kraft paper operations. In 1984, U.S. corporations sold some 900 divisions and subsidiaries, up 40 per cent over 1980.
Divestitures and acquisitions are not two unrelated phenomena, one to be applauded and the other condemned. One company’s divestiture is often another’s acquisition. In addition, divestitures play an integral role in the acquisition process as acquirers sort through what they need and what would have more value in the hands of others. “Asset stripping,” as it is pejoratively termed, is frequently used by acquirers to pay down debt incurred to finance their acquisitions, as in the case of Allied’s takeover of Bendix or Avco’s acquisition of Textron.
The substantial removal of three legal roadblocks in the ear? 1980s set the stage for this “riot of voluntary restructuring’: (1) The Justice Department significantly relaxed antitrust restrictions based on size. In the 1960s, for example, the Justice Department blocked the merger of two Los Angeles grocery chains because they had a combined total of 5 per cent of the market. Today, acquisitions that result in 20 per cent market shares routinely go unchallenged.
(2) State antitakeover statutes, once a mainstay of corporate defense strategies, have fallen by the score on the grounds that they conflict with the tender offer provisions of the Securities Exchange Act of 1934.
(3) The phased decontrol of crude oil, as well as the partial deregulation of banking, finance, insurance, transportation and brokerage created opportunities for economies of scale through mergers and acquisitions.
The relaxation of antitrust enforcement has permitted a merger wave that is economically more sound than the conglomerate wave of the late 1960s and early 1970s. With the Justice Department blocking most horizontal and vertical mergers during that period, the only way for aggressive corporations to expand was by taking on unrelated businesses. The ex post theory that was used to justify the conglomerate trend was that good managers could run any combination of businesses, and that conglomerates perform a valuable function for investors by diversifying.
Now, however, corporations are being permitted to grow through acquisitions more closely related to their core businesses. To finance these acquisitions, many—especially conglomerates—are unloading businesses that are healthy but extraneous. Divesting such businesses has in turn become more attractive because the companies to which they are most valuable—those in the divested units’ industries—are now permitted to bid for them. “As the game rolls on, the business landscape of the U.S. ends up with more and more ‘pure’ companies concentrating on just one or two fields they know best.”
It is hardly an exaggeration to say that without a Stock Exchange there can be no market economy. What really distinguishes the latter from a socialist economy is not the size of the “private sector” of the economy, but the ability of the individual freely to buy and sell shares in the material resources of production. –Ludwig Lachmann
The three legal factors mentioned above caused this massive reshuffling of assets only in the sense that they reduced governmental barriers to the free interplay of a number of economic forces:
(1) Mergers in the same or closely related fields often yield significant economies of scale, whether in production, distribution, technological development, or management. This is especially true for firms in recently deregulated industries where regulations either directly prohibited mergers or kept profits artificially high so that management’s incentive to search for savings was dulled.
(2) Management skill is not unlimited. Just as central planners cannot manage an entire economy, a corporate management team cannot efficiently handle two dozen disparate businesses. The only way out of this dilemma is to expand the management team by creating new layers of management—a sure recipe for burying valuable assets in a bureaucratic maze. As economist Frederick M. Scherer concluded from his extensive study of the conglomerate merger movement, “We typically found management failure. The acquirers didn’t know how to manage their acquisitions.”
(3) Contrary to the diversification rationale for conglomerates, investors may prefer a different mix of investments than that assembled by corporate managers. While small investors managing their own portfolios may have some desire for management-assembled packages, the rise of mutual funds and pension funds has tilted the balance in the other direction. “Increasingly, professional portfolio managers prefer to trust their own skill at picking industries to invest in, rather than letting corporate managers offer them a packaged smorgasbord.”
(4) Information in securities markets is not costless. Investors and investment analysts find it easier to understand companies that are in a handful of businesses than those with scores of extraneous assets.
(5) The inflation of the 1970s increased the market value of certain assets held by corporations, but accounting rules prevented corporate balance sheets from reflecting this appreciation. It became increasingly difficult for investors to understand the value of assets held by corporations, especially complex ones with diverse and far-flung assets.
For all but the first of these reasons, corporate managers are finding that, contrary to the received wisdom of the past, the parts may be worth more than the whole and that a simplified, slimmed-down business may result in a higher stock price. Unearthing a business buried deep in a complex corporate structure may allow both that business and the remainder of the corporation to be managed more effectively, and may allow the market to better evaluate both businesses. But—and this is a critical point—unearthing such businesses would be substantially less profitable if the antitrust laws blocked their acquisition by other corporations in the same line.
Hostile Acquisitions Accelerate the Asset Reshuffling
While the relaxation of antitrust enforcement and the partial deregulation of certain industries were necessary for consenting managements to undertake this massive restructuring, the process was greatly accelerated by the hostile takeovers unleashed by all three of the legal changes described above. A process that might have been undertaken in a leisurely fashion by many managements assumed new urgency when they felt the hot breath of corporate raiders on their necks. “With each attack by corporate raiders, ‘people are becoming aware’ of hidden value, says [raider Irwin L.] Jacobs. So, lest they fall prey to the raiders, managers are digging up and cashing in on the buried assets themselves.”
“Earnings—what most investors react to—were worth less [after the inflation of the 1970s], while the underlying assets were worth more. The situation was ready-made for raiders and liquidators who knew how to buy on the basis of earnings and how to sell on the basis of assets.” If their corporations did not sell assets, there was no way for shareholders to capture their value in the form of higher stock prices. Asset sales by successful acquirers—and then by incumbent managers seeking to deter acquisitions—provided the vehicle by which shareholders could capture this hidden value. Raiders forced an earnings-oriented marketplace to take asset values into account.
The most prominent example of the power of hostile acquisitions to accelerate an economically desirable restructuring is T. Boone Pick-ens, whose Mesa Petroleum tried and failed to take over several major oil companies. His raids forced target companies to merge into “white knights,” divest extraneous assets, reduce their top-heavy management bureaucracies and pay cash to shareholders through share buy-backs. According to economists Harold Demsetz and Michael Jensen, speaking at a Securities and Exchange Commission forum, the oil market has undergone massive changes in the past decade, making it inevitable that there would be fewer oil companies. Realizing this fact before most oil company executives, Pickens acted as an arbitrageur, forcing them to adjust to a reality they had not yet grasped.
Objections to the Asset Reshuffling
We have already seen that a good deal of the popular fear of corporations gobbling each other up until only a few are left is unfounded. A similar but more subtle objection to the restructuring of American corporations is that, as firms concentrate their resources in one or two core businesses, there will be fewer competitors left in each market, thus increasing their monopoly power.
The weak link in this argument is the jump from the fact of fewer competitors to the conclusion that monopoly power is increased. This argument is reminiscent of the era when the United States was virtually a self-contained economic unit, when all the relevant firms in an industry were American. In the last two decades, foreign trade has expanded from roughly one-twentieth of America’s economic activity to roughly one-sixth. Most major American firms face significant competition from abroad. The best way to ensure that the restructuring of American corporations does not increase their monopoly power is to lower trade barriers.
This argument also underestimates the role of potential competition in deterring large companies from charging “monopolistic” prices. Such potential competition is enhanced by a robust market for businesses. A potential competitor, which may lack expertise in a given industry, can short-circuit an arduous learning process by acquiring a small firm in the target industry. Thus, the same wide-open process that often reduces the number of competitors in a field also enhances the ability of others to enter it.
Another frequently voiced objection to hostile acquisitions is that they “cause” plant shutdowns and layoffs, disrupting people’s lives. This objection confuses the messenger with the message. Acquirers do not shut down plants or pare staff out of spite, but to increase their economic returns. In most cases, such actions should have been undertaken by prior managements to adjust to a changing economic reality.
In any event, the highly visible plant closings following on the heels of takeovers do not appear to be more frequent than plant closings generally. At the SEC forum mentioned above, economist Michael Jensen “said there is no evidence that takeovers are associated with a higher than average number of plant closings. What tends to get closed down, he said, are redundant corporate headquarters, suggesting that the pleas for protection are coming from top executives who fear for their jobs.”
Leveraging Corporate Balance Sheets
So far, we have focused on the reshuffling of assets among corporations, or the left-hand side of corporate balance sheets. However, virtually every transaction has also involved the right-hand side of corporate balance sheets, invariably by increasing the ratio of debt to equity.
A major question facing every potential acquirer is how to finance its acquisition. Since most acquirers do not have sufficient cash sitting in their corporate treasuries, they must either issue additional stock or borrow. For reasons explained below, they almost always borrow, either from bank syndicates or by issuing bonds directly to the public.
Until recently, it was difficult for acquirers to borrow from the public because the level of debt required for many acquisitions was so high that rating agencies refused to give it an “investment grade” rating. Enter the “junk bond,” an unrated, high-risk, high-yield bond. A couple of years ago, enterprising investment bankers discovered that there is a substantial market for such securities, especially among investors large enough to reduce their risk by diversifying. Junk bonds have become a powerful tool in the hands of potential acquirers by permitting them to issue large quantities of debt backed by the assets of the acquired company.
While the quantity of junk bonds issued in hostile acquisitions has been relatively small, the availability of junk bond financing has made it possible for small raiders to threaten much larger target companies. Even though Mesa Petroleum failed to take over a single major oil company, its access to such financing made its raids more credible.
The lesson of junk bonds has not been lost on managements of potential targets. Now that takeover defenses based on the antitrust laws or state antitakeover statutes have become largely ineffective, such managements have discovered the “financial defense.” If raiders believe that the target has sufficient cash flow to support a much higher level of debt, target managements can pre-empt this cash flow by issuing debt, using the proceeds to raise their stock prices by repurchasing shares.
In the last couple of years, a trickle of share repurchases has turned into a torrent, as such major firms as Unocal, Phillips Petroleum, Atlantic Richfield, Exxon, Union Carbide, Ford, CBS, Litton Industries, and Revlon instituted major buyback programs, often financed with debt. Debt is often used to finance selective share buybacks from raiders, a process pejoratively termed “greenmail.”
In addition, debt is the sine qua non of another recently perfected defensive technique, the leveraged buyout, in which the managers of a target company outbid or pre-empt a raider by borrowing enough to buy out the company’s existing shareholders.
In sum, just as hostile acquisitions have served as a powerful lever to force the reshuffling of assets among corporations, they have also directly or indirectly caused a great many corporations to increase their ratio of debt to equity. New debt issuances less repayments totaled $164 billion in 1984, while shares retired in buybacks, mergers and leveraged buyouts exceeded new issuances by $72 billion in 1984 and $65 billion in 1985.
What has made this stampede into debt work? Why can raiders make a profit acquiring much larger companies entirely with debt? Why do share repurchase programs raise stock prices instead of causing shareholders to flee from corporations with more fragile financial structures? Why does everyone seem to win from a leveraged buyout?
The answer is that the tax law discriminates against equity financing and artificially encourages debt. Interest on debt is fully tax deductible, while dividends are not. Dividends are taxed twice, first when the corporation is taxed on its net income, and again at the shareholder level.
Given the huge tax advantage conferred on debt, why do corporations issue any equity securities (above a nominal level) at all? Debt is risky for a corporation because interest payments are fixed legal obligations independent of its changing financial fortunes. By participating in the company’s risk, equity investors give it more flexibility and resilience. Corporate managers usually seek a debt to equity ratio which they consider optimal, in light of the corporation’s tax status, the riskiness of its business, and the extent to which they are averse to risk.
Since the tax bias against equity financing has existed for years, why has such a massive move from equity to debt occurred only in the past few years? It appears that two factors contributed to this change.
First, the removal of legal barriers to hostile acquisitions allowed risk-oriented raiders to impose their risk preferences on more conservative incumbent managements, either by replacing them or causing them to “leverage up” as a defensive tactic.
Second, the Economic Recovery Tax Act of 1981 increased corporate cash flows by permitting accelerated depreciation, but did not increase the book earnings which tend to be the focus of investor attention. Raiders were among the first to understand that the larger cash flows enhanced the ability of corporations to repay debt. By bidding for companies on the basis of cash flow, raiders forced the market to take it into account in valuing companies.
The partial removal of key legal restraints in the early 1980s has permitted the flowering of the market for corporate control, helping to align corporate managements with the interests of shareholders and creating a giant auction market which tends to reshuffle assets into more efficient combinations. Interwoven with this process has been a dramatic increase in corporate debt, largely brought on by the tax bias against equity financing, making many American corporations more vulnerable to an economic downturn.
The latter trend has evoked a great deal of adverse commentary and numerous legislative attempts to curb hostile acquisitions. While halting takeovers would undoubtedly slow any further erosion of corporate balance sheets, it would also deny us the benefits of the market for corporate control. The artificial expansion of corporate debt is best remedied by ending the tax bias against equity financing. 
Winners of the 1985-1986 Freedom Essay Contest “The Foundations of a Free Society”
First Prize: Peter S. Heinecke, Princeton University
“The Fallacy of Comparable Worth”
Second Prize: John Majewski, University of Texas at Austin
“The Industrial Revolution: Working Class Poverty or Prosperity?”
Runners-up: Terence B. Byrne, McNeese State University
“An Old Hostage Crisis: America’s ‘Free’ Farm Markets”
Jay Habegger, University of Colorado at Boulder
“Inflation, Money, and Freedom”
Brent M. Jonstone, University of Texas at Austin
“Information and Economic Problem”
High School Division
First Prize: Sarah H. Lindsey, Jardley, Pensylvania
Second Prize: Mary Jane Massey, Daytona Beach, Florida
“George Mason: Framer of Liberty”
Runners-up: Tim Lawrie, Fairfax Station, Virginia
“‘Liberation’ Theology: A Policy of Slavery”
Gavin marshall, Oakville, Ontario, Canada
“Majority Rule vs. Individual Rights”
Bobby Taylor, Kingsport, Tennessee
“A Proposal for Educational Reform”
Look for the winning essays in forthcoming issues of The Freeman