The Wall Street Journal’s ($) Holman Jenkins, Jr. notes in his Business World column today on the big mergers announced over the past week (P&G-Gillette, SBC-AT&T, and MetLife-Travelers) that management is coming up with ever more creative pitches to use a company’s retained earnings for anything other than paying it to shareholders:

Procter & Gamble and Gillette spent as much effort on getting the incentives of key players right as they did on touting “synergies” and the like.
Take Gillette’s biggest shareholder and presumably the biggest beneficiary of P&G’s willingness to buy the company for an 18% premium: Berkshire Hathaway chief Warren Buffett committed a novel act when he made a video to be distributed on P&G’s Web site not merely praising the merger as a “dream deal” but vowing to increase Berkshire Hathaway’s stake in the combined companies.

Mr. Jenkins goes on to note that Gillette CEO James Kilts — who is making a cool $185 million on the merger — provided further enticement for P&G shareholders by promising not to sell any shares of the merged company for two years after the deal closes. And, if Messrs. Buffett and Kilts assurances are not enough, P&G management also promised that it would spend $18 to $22 billion over the next year and a half in buying back P&G shares.
So, what on earth is going on here? Mr. Jenkins thinks he knows:

[H]aving large amounts of cash around is also deemed a temptation to management to engage in undisciplined spending. The message here: If shareholders would kindly approve the deal, management will keep itself on a short leash in the future.
Alas, none of these gestures managed to stop Procter & Gamble’s stock price from falling off the table in the manner typical of companies announcing costly acquisitions.

Mr. Jenkins goes on to note that the market requiring incentives rather than empty promises to approve a deal is a step in the right direction in the business of selling mergers to the investing public. However, as with Hewlett-Packard’s acquisition of Compaq and Comcast’s failed bid for Disney, is the acquisition price for Gillete so high that, as Professor Ribstein might observe, it takes a near-delusional synergy theory — plus Mr. Buffett’s promotion of the deal — for P&G management to justify it?
By the way, Mr. Jenkins takes note of the unusual nature of Mr. Buffett’s involvement in selling the Gillete deal to P&G shareholders, and observes:

Mr. Buffett is famous for keeping his stock-buying intentions under wraps, knowing that his legion of fans might otherwise move the stock against him, so this was a first.

That said, we wonder what Pandora’s Box Mr. Buffett has opened. The role of big shareholders is to ride herd on management, not to peddle the goods to shareholders of acquiring companies as ally and agent of the acquiring company’s management. Having put himself in the position of selling the deal to P&G’s investors, is Mr. Buffett now obliged to warn them in the future if he intends to dump the stock?

Indeed, in addition to P&G shareholders, perhaps Mr. Buffett should also call Eliot Spitzer if he plans on dumping any his stock involved in this deal anytime soon.
Update: In commenting on Mr. Jenkins article, Professor Ribstein’s notes that the deals may be a positive sign that the takeover market is combining with the trend toward more productive distribution policies to produce real corporate governance reform, and then adds:

It’s worth noting that none of this has anything to do with Sarbox.