What is a White Shoe Firm?

A white shoe firm is a business that has a reputation for promoting a set of ethics that excludes the practices that are sometimes employed in hostile takeovers and other attempts to undermine a given business operation. The exact origin of the term is contested, with some sources citing a fashion trend of the 1950s as the first appearance of the concept. Others believe the term was coined earlier as a means of identifying businesses that were highly conservative, somewhat closed to change, and thought to be somewhat elitist. The actual usage of the term today is sometimes still associated with elitism and is considered a negative rather than a positive description of a given business operation.

When applied as a positive means of describing a business, a white shoe firm is one that stands firmly against the use of laws and various business strategies in an attempt to engage in a hostile takeover of any company. Firms of this type are sometimes known as shark repellent in the business world, since they tend to marginalize corporate raiders or black knights that seek to buy businesses for the express purpose of dismantling that company and selling off its assets. A white shoe firm may also have the reputation of being a shark watcher or an industry watchdog, especially if the firm has a habit of monitoring the activities of known raiders and alerting their targets to the emerging takeover attempts.

At times, a white shoe firm may also function as a white knight or a white squire. In this application, the firm comes to the rescue of the targeted firm and aids in fending off the advances of the corporate raider or black knight. This may involve stepping in and purchasing enough interest in the business to prevent the raider from acquiring any more shares, or even involve entering into a friendly acquisition with the current business owners if they are agreeable to this approach. While aid of this type is often successful in thwarting a takeover attempt, the effort can fail and leave the white shoe firm the new target of the raider, a situation that creates an entire new set of problems for the firm.

When used in a negative sense, a white shoe firm may be a business enterprise that is considered to be rigid and unwilling to adapt to a changing business environment. Here, the firm may consider itself somewhat better than its competitors, and go to great lengths to express that perceived superiority. Often, the mindset of the firm is that others are wrong and the firm is right, and that time will eventually bear out that fact.

There is some difference of opinion regarding how the designation of white shoe firm first emerged. One concept holds that the term is associated with the white buck shoes that became popular during the conservative decade of the 1950s in various nations around the world, noting that those shoes were considered somewhat elitist. Other ideas tie the term back to the concept of purity in thought and deed portrayed in many motion pictures during the early decades of the 20th century, implying that this type of firm is against any type of shady dealings. Since the term may refer to positive or negative characteristics, it is often necessary to clarify exactly what is meant when a given business is identified as a white shoe firm.