The attempt by Cenveo Inc. to acquire Banta Corporation drew attention to a rather arcane bit of legal detail regarding corporate codes of ethics. 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 directors, managers, and other persons close to the company buying Banta stock 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.  When Cenveo’s executives were free to buy stock in Banta, Banta’s stock price traded around Cenveo’s initial offer of $46 per share. However, Cenveo’s Board raised their offer to $47 per share and finally to $50 per share before pulling their offer on October 31, 2006. In the end, the share value rose to $52.50 as a result of RR Donnelley’s winning offer.