Cenveo's attempt to buy Banta drew out a bit of information that Senior Editor Gail Nickel-Kailing pointed out in a report today at WhatTheyThink.com. The report is entitled "Cenveo Board Waived Its Ethics Code During the Takeover Attempt of Banta: The Question Remains, Was This Ethical?" (Subscription Required) Here are some excerpts:

On August 8, Cenveo’s Board of Directors waived its code of ethics, just prior to their offer to purchase Banta. This waiver allowed certain officers and directors and their affiliates to purchase Banta stock after the public announcement of the proposal to buy Banta and after the waiver of the ethics code was announced. On the surface, the move puts Cenveo... into a potentially conflicting situation. In essence, Cenveo’s officers and directors who individually buy Banta stock have Cenveo backing; while both Cenveo and Banta have the responsibility to pay the cost of the takeover effort in fees to lawyers and accounting firms. The conflict potentially could become stronger; for example, if Cenveo’s Board would raise the offering price—which was done twice in this case...

“I can’t imagine serving on the board of a public company in the current environment of regulated transparency—post-Sarbanes Oxley, for example—and taking that kind of action. It would suggest that something is blinding the decision makers to the bigger picture.” Bob Shoemake, Center for Ethical Business Cultures

Perhaps Cenveo was just being transparent when waiving the code of ethics in this case. One financial and legal expert explained, “Executives buy stock in target companies all the time, but most don’t officially waive a code of ethics to do so. One should not assume executives would act unethically during the takeover process (by raising the offering price so their holdings increase in value) since executives almost always have more stock in their own company at stake. Making a bad deal would not make sense.”