Imperial Valley press., 1939-02-10
By ROGER BABSON

This is the open season on annual
reports. Readers who own few
shares of stock are now hearing
about Your company during the
past year etc, etc" These reports
are SO inadequate and unintetrest-
ing that few people have the pa
tience to read them. After receiv-
ing a few myself, l have a strong
feeling that in playing up the bat
tie between capital (mvestors) and
labor (Wage earrlerS), we are only
telling half a story We should
nublicize the need for better man
agement as we'll
The small stockholders lot is a
difficult one Fundamentally, II
he is not willing to study the af-
fairs of his corporation, he should
rot invest money in it, Too many
people become stockholders because
they want to buy cheap stock that
lis going up" Because this is
true. the management-Som
owning little or no interest in the
company-has practically free
hand. They pay themselves what
ever salaries they want to; they
buy and sell real estate; they enter
into contracts; and they conduct
the entire business to suit them
selves.
Annual Reports Incomplete
Outside of showing the cash po-
sition, the accounts payable, and
the net income, the ordinary an
nual report does not mean thing
TO the average investor. There Is
little of fundamental value to
those sincerely interested. Manage
ments get by with these reports
every year because the stockhold-
ers are a disorganized and unrepre-
sented group. There is a tremen-
dous need in this country for small
stockholders to take a greater in
terest in the affairs of their COM
panies. Investors have been squeez-
ed long enough by grating pollti-
clans, selfish labor ano
unScrupulous insiders
Chairman William Douglas OF
the S. E. C. is starting public
thinking along this line. He recog-
lllLCS lIldO lllC 1iDllIotiOAi Va VI 'iAo
actions of officers and directors II
the securities of their companies
is only one step. 1t has stopped
certain amount of inside" security
manipulation. But that alone vii
not give us better management. 81
he has done two important thing
g recently:
q rpfllltaH a
form in order to make boards o
= directors more careful of their ac
tiOns.
q He has suggested that board
of directors be composed of man
Y agement, plus PROFESSIONAL direct
i ors who are experts in their line.
New Proxy Form
: Stockholders will recall the oil
8 type of annual proxy BY sign
: ing the little card the stockholde
p empowered several of the director
to vote his stock in any way the
X wished at the annual meeting. Th
d new proxy requires giving informa
l. tiCn on what is to be voted upor
n it lists the directors and tn
n amount of company securities the
IS own; and certain other interest
t, the directors may have in the com
Is pany. CFor instance, a directc
IS may also be the company'S attoi
ney. If so, his legal fees must
l. reporteO.
S. This is a big step. 1t will ope
Is many a stockholders eye! M
ld forecast is that the corporatio
;" lawyer will cut his fee if he cor
N tinue to be a director. Many boar
IN members will buy some stock
n the company they arc directing
Ol or resign in favor of others who c
have a substantial financial intere
I'd in the company Finally, I'll
ly Stockholder, before he gives h
Us proxy, will know the nature Of tt
n business to be voted upon at Il
a meeting.
II. Mr.. Douglas second step is st
in the talking it-over' stage.
employ professional directo
would be hitting at the same trol
Bile that l wanted to correct Wht
- recommended a stockholdcl
Nv union last year. Currently, maj
an boards of directors arc compos
,er of three or four managing office
of the company plus two or thr
outside directors. The latter a
often just big Names Many
these men know little about t
company's operations and M
have no financial interest in it.
1t is not their fault. The direc
Crs' fees are SO small they cam
afford to give time to the cor
pany's affairs. They simply ok
what the management recommend
av Many of these members go on t
,ly board for contact information al
I'd for the honor of being "big sho
nv Chairman Douglas directors, ho'
is ever, would be experts in their lii
n They would have nothing else
ne do but be directors. They Wou
he represent not only stockholders b
It's workers and customers. They wou
is be well paid for their job. TIL
n would make the board of directc