The Richmond Virginian. (Richmond, Va.) 1910-1920, 1916-08-27
THE RICHMOND vIRGINIAN-sUNDAY, AUGUST 81 1916

y " i IN i n IN - . " IN ~ "A L, "A
way companies and to the trade COM
mission and the court where indusffi-
al corporations are concerned. II 1t
Is just 1t should be put into affect
upon the approval of thres-fourths
of each class Of security holders. II
1t Is oppressive any security
should be able to defeat 1t.
| (e) The farce of selling a property
Of this character should be abolished.
! Upon the approval OF the plan by
the court, the new or reorganized COM
pany should take the place of the old
company. Every security-holder
would be bound by the plan and the
securities of the new company would
stand pledged and liable to sale for
! the payment of such assessment as
the court may deem necessary to re-
| habilitate the property.
(f) All the expenses Of reorganlza-
ton as we'll as the amount and char
acter of new securities to be issued,
should be subject TO the approval of
the commission. The entire proceed
ure should be under It's control, sub
ject to review by the courts.
The commission would call together
the security holders, who would form
| their own committees, select their
| bankers and eliminate the graft and
manipulation that now characterize
! the proceedings 1t would inciden-
tally put an end to tho perilously in
creasing concentration OF our great
corporations in the hands OF a few
men which is now proceeding at a
rate that will startle our people into
protecting themselves when they
learn the facts. But It will then be
! too late.
faf 80
minority stockholders.
! 1t Is manifestly right that the ma
I Jority should control, but 1t Is funda-
mentally wrong that the minority
should have no representation to in
| form itself of the way In which .he
majority is administering its trust.
Compulsory cumulative voting, which
means proportional representation on
/ the Board of Directors, should be a
condition of every corporate charter.
! This means that If, for instance, the
governing body consists of nine men,
bers, each one-ninth of the stock
/ should be able to elect a director.
! Five ninths of the stock would thus
elect five of the nine directors but
I the minority would be able to parti-
cipate in the management. to know
what Is going on and TO prevent He
gal and oppressive action by the ma
. jon WHICH 10 IOW HDuSSiDis Dc-
I cause II has no means OF knowing
( what is contemplated. Some of the
States require cumulative voting by
their constitutions Tho bar should
agitate its enactment by the others
( but has taken no step In that direc-
] ton. 1t has on the contrary permitted
without protest the partial emasc ula-
/ ton Of this salutary provision by the
corporations through laws classifying
"a n,a h,,u Ir{y "a
larger proportion of stock in order
to elect a minority director.
! Many OF the worst scandals and
most cruel wrongs that have charac-
/ terized corporate management would
/ have been averted II minority repre-
sentation had been made mpulsory.
1. The existing methods OF electing
directors should be abolished and an
/ entirely new system substituted, by
| ~ requiring the Board OF Directors
10 nominate It's candidates before the
election and to advice the stockhold-
ers of such nominations; p abolish
ing proxy voting; f3) permitting
stockholders to vote by mail as well
as In person, but not by proxy and
a. prohibiting any one other than
the true owner from voting the
shares.
In great corporations where the
stock Is widely scattered the control
is frequently retained for a decade
or more by interests that have little
or no financial stake in the corpora
ton except to exploit 1t for their own
gain and it has been found well-ni sh
impossible to dislodge them in the
face OF their demonstrated unftness.
This Is especially true with respect
to railroad corporations and great
Interstate Industrial combinations II
Is due partly to the secrecy that is
tolerated in corporate affairs and the
difficulty experienced by stockholders
in discovering what Is being done with
their property. 1t is, however main
ly due TO the Anticipated election
machinery; the absence OF minority
representations; and the vice OF proxy
voting
The stocks Of the so-calied public
corporations-the stocks that are
listed and actively dealt In on the
stock exchange-are usually to . con-
siderable extent in the hands of brok-
ers who have bought them for GUS
toners on margin and hold them as
security for the payment of the bal
ances owing them on the purchase.
These stocks are the pawns in the
gambling game that constitutes the
great bulk OF the dealings on tho ex-
change. They are usually carried on
the books OF the corporation In the
brokers' names. although the stock
certificates are constantly passing
from hand TO hand among the brok-
ers without apparent change of own
ership on the stock books of the COM
pany.
In the very rare instances In which
| disguised stockholders outside the
Wall Street circle. driven to despera-
ton by mismanagement or worse by
their trustees. are so reckless or fool
ish as to imagine that they can
change the control under existing
( law, the insiders gather in the
proxies from the brokers in whose
names these pawns are registered and
In which the brokers have no inter
est except as pledges. The specu-
lating owner who owes his broker
money on the stock for which, by thu
| tina hrQkar "a AZ that ho In