The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-04-06

responsibilities which now attach 10 them a.
trustees for the policyholders and giving
hem the right 70 act openly In the interest
OF the stockholders. In order TO secure COM
piete control a. a given time. they will only
need TO soduce, cajoe or deceive three
| OF The representatives OF the policyholders
INTO Joining them; and II the condition that
each director must be a stockholder is
maintained In the charter, tho likelihood OF
occurring and maintaining control In this
manner will be much increased. Mr. Hyde's
| control OF 90 large portion OF the stock In
aleates plainly that II would be very diiicult
70 select hfty-two directors who are stock
holders without much more than the ma
Jorlty Of them being persons who are qualified
70 act as directors either by being elected by
me stock Interest or BY being furnishe Cd the
necessary stock by Mr.. Hyde himself.
The creation Of e permanently adverse In
terest In the Equitable is q matter OF very
serious moment. The Equitable is not a
STOCK company. doing a participating buSi-
ness but is properly classified as a mutual
company with a guaranty capital. IL was
heId out 70 be mutual az the outset, and re-
peatedly In lie liter Ature from that time until
me present IL has been so represented. More
over. the distinction between the two classes
OF companies ls as follows; In a mutual
company with guaranty capital the interest
OF me stockholders is limited TO q dividend
named In the charter, which can never be
exceeded, and hey ond that dividend the stock
| mas no interest whatever; while In q mixed
| company or stock company. Issuing particle
patlns policies the dividend TO the stock
| holders Is either not limited at all or 10 q
proportion Of the PROFITS In some way
In companies Of the latter class. therefore,
the stockholders share in the additional
profits as the company does a more and more
successful business. Tho interests Of the
poHcyholders and the stockholders are thereby
brought into close harmony. and except
where stockholders are blind to their own
ultimate interests and act for Immediate
gains Instead, after the manner OF wreckers
instead OF upbuilders. the interests OF the
pohcyholders are reasonably safe In their
hands In the nature Of things
On the other hand. In mutual companies
with guaranty capital. the stockholders are
not the gamers by the company's doing a
larger and more successful business They
are thereby In N cory compelled 70 sit quiet.
perhaps vested with the absolute control Of
the company, and see enormous prohts rolled
up for the policyholders. in which they them
selves do not share. Such a condition is
perilous for the policyholders at best; and
when after a very large policyholders' sur
plus has been accumulated. and there may
already have appeared an inclination on the
part OF some Of the stockholders 70 obtain
an Indirect and improper profit for themselves.
II becomes distinctly dangerous and perhaps
suicidal 70 set up a permanently adverse In
terest vested with great power in the hands
OF the stockholders
Consider for a moment by what methods
the stockholders can In such a company OBJ
tain for themselves larger returns than the
dividend which Is accorded them by the
charter 1t can only DO in one Of the follow
ing ways, short OF absolute abstraction OF
funds by theft
First. by voting 10 themselves and their
retainers inordinAte salaries.
Secondly, by manipulating the investments
Of the company for their own benefit.
IL Is charged that the owner OF the con-
trolling interest Of tho stock Of tho Equitable
has been guilty n person or by proxy Of both
OF these offences; and II II should prove. as
result Of the investigation which has now
been called for by both parties, that this IL
the case. IL will be manifest that IL would bs
improper In the highest degree 10 permit the
representatives Of this interest to have any
further voice in the management Of the i'm
mense funds belonging 10 the pOlcyholders
OF the company.
In another OF the New York papers OF this
morning il is asserted as a matter OF absolute
fact that Mir Hyde in an unEuarded moment
has made the threat that II the thing Is pushed
too far he will apply for a receiver for the
Equitable. will cause its policies TO be rein
sured in some other company by paying over
TO that company the reserve funds. and will
then divide the surplus funds among the stock
holders At least. Il is represented that this
is the significance Of his threat. Policyholders
may rest easy as to even the possibility OF
this threat being carried out. Mr. Hyde is
citizen Of New York, and his suit. therefore.
would necessarily be brought in the courts Of
New York. He il not a judGRent creditor of
the company. and under the law which his
company procured to be put upon the statute
books OF the state for the purpose OF pre-
venting policyhoders from questioning its
right 70 do as IL pleased concerning the dis
tribution Of the surplus OF the company. a
suit for a receiver In this State can be brought
only by the Acknowledgement acting on his
own motion or on the request Of the Superin-
tendent OF Insurance. Moreover. Mr.. Hyde
could have no ground, under any crcum-
stances, for an application for receiver
Even II the company failed to earn and to pay
the per cent dividend upon the stock OF the
company so long as II was solvent. its stock
holders could not successfully force a re-
ceiver upon it against the opposition OF the
4 reinsurance, moreover,
would not relieve the company OF It's obliga-
tons. and its capital would necessarily re-
main as a security TO the policyholders until
the last policy expired. It's policies. more
over. call for the accumulation OF surplus
funds belon ging 70 the poioyholders, and no
reinsurance could be made. or could con
ceivably be approved BY the Superintendent
Of Insurance. which did not transfer as a trust
fund for these policyholders the entire sur
plus OF the Equitable Life Assurance Society. |
not a single penny OF which. beyond what Is |
necessary TO pay the per cent dividend upon I
The stock, belongs to the stockholders
The foregoing is not the opinion Of a law |
yer. but is the result OF conference and con- /
sulation with several able lawyers and OF an /
md pendent study Of this question by myself /
IN a professional way. II may however, ,
be confirmed by any attorney who will take .
he trouble TO examine into the matter care I
FULLY.
II would be possible, though. for a re- /
10 be appointed for the Equitable Life 4
assurance Society without the intervention /
II the Attorney General OF the State OF New /
FORK though that Intervention would. no /
ioubt. not be denied. II asked for by a very 4
arge number Of the policyholders, and eSpe-
tally II the investigation now on foot shows
dearly that Mr. Hyde is guilty Of the offences
,harRed against him, which would demon
trate his utter unltness TO occupy an of1cial
position with the company. and the grave
LANCER toits policyholders Of his continuing the
took control in whole OF in part. In event
4 the refusal Of the Attorney-G eneral Of the