Appendix A REPORTING REQUIREMENTS AND DISSEMINATION OF INFORMATION ON CORPORATE OWNERSHIP AND STRUCTURE A Report From the General Accounting Office to Senator Metcalf, March 1973 FEBRUARY 9, 1973. respect to the subject matter referred to in (1), (2), (3) Mr. ELMER B. STAATS, and (4) above. Comptroller General of the United States, This requested information has been the subject of General Accounting Office, Washington, D.C. informal discussions between my staff and your staff DEAR GENERAL Staats: As you may know, I sponsored over the past 2 months. I have, therefore, made every legislation in the 92nd Congress which would provide for effort to limit the scope of the request to that which the obtaining and public dissemination of information on is reasonable and obtainable within a limited period of the ownership and structure of large corporations, par- time. I ask that the requested information be submitted ticularly those under the jurisdiction of Federal regulatory by 15 March. agencies. If you have any questions with respect to the subject Such legislation is before the Government Operations matter of my request or as to its time schedule, please Committee this session. It is my desire to start now to get in touch with my executive secretary, Vic Reinemer or prepare certain data on Federal policy and procedures counsel , Win Turner, at 180-2651. which will be useful in the consideration of this legislation. I would appreciate your timely cooperation on this My request is that your Office provide me with informa- request because of the possibility of early hearings on tion related to the following subject areas with respect to the legislation. There is no need for you to obtain agency each of seven regulatory agencies; Federal Power Com- comments on this matter. mission, Federal Communications Commission, Civil Very truly yours, Aeronautics Board, Federal Trade Commission, Inter LEE METCALF. state Commerce Commission, Securities and Exchange Commission and Federal Maritime Commission: COMPTROLLER GENERAL (1) All laws, rules, regulations or other procedures of the agency that require information as to the proprietary OF THE UNITED STATES, (voting) ownership of a corporation or firm, including Hon. LEE METCALF, Washington, D.C., April 10, 1973. whether proprietary or trustee owners must report those U.S. Senate. who control i percent or more of the stock. (2) All laws, rules, regulations or other procedures of DEAR SENATOR METCALF: In accordance with your the agency that require information as to subsidiaries of letter of February 9, 1973, the General Accounting Office such corporation, parents of such corporation or any has identified the reporting requirements imposed on other company or firm having control over the subject regulated companies by Federal regulatory agencies with corporation. For purposes of this request, the definitions respect to stock ownership, control, diversification, debts, of subsidiary", "parent" and "control are set forth and officers. in the attached bill." The seven regulatory agencies have broad authority to (3) All laws, rules, regulations or other procedures of obtain whatever information they deem necessary to the agency that require information as to officers or carry out their statutory responsibilities. This information directors of the corporation or firm, its parent or sub- is obtained through formal proceedings on a case-by-case sidiary, who are also officers or directors of other corpora- basis, in periodic reports from regulated companies, and tions or firms. in numerous applications requiring agency approval. (4) All laws, rules, regulations or other procedures of Taken as a whole, the seven agencies receive a vast the agency that require information as to the long-term number of reports and applications many of which and short-term debt of a corporation or firm. contain information on the subject area of your request. (5) The extent to which such laws, rules, regulations or We reviewed the content of these reports and applicaprocedures are being enforced, responded to or are other- tions, as well as applicable legislation, and the agencies' wise effective or ineffective. rules and regulations, to identify the pertinent informa(6) The extent to which such information is available tion regularly received by the agencies. The information to the public and the cost of duplication to a person obtained by us was provided to Nr. Vic Reinemer of your requesting such information. staff on March 26, 1973. (7) A description of those laws, rules, regulations or In your letter you inquired as to whether the laws and procedures which have been recommended by the agency agency regulations were effective and whether they were or any of its members, during the past 10 years, with being enforced. It appears from our examination of a limited number of reports that the companies are provid- the 30 largest stockholders. The 24 nominees represented ing information on the matters on which the agencies 2 insurance companies and 12 banks. However, since the required data. However, it was not possible to ascertain banks regularly hold stock both for their own account and whether all pertinent information was accurately reported in trust for others, it cannot be ascertained from the anwithout an examination of the companies' books and nual report who owns and/or rotes the stock held in the records. This was particularly true with respect to sub- nominees' names. sidiary and parent relationships, officers and directors Assuming that the purpose of the agencies' ownership and their stock holdings, and long-terin and short-term reporting requirements is to identify the organizations and debts. persons that control regulated companies through stock With the exception of the Federal Trade Commission, ownership and particularly through the right to vote the each of the regulatory agencies regularly receive informa- stock, it appears that, in addition to the information retion on the ownership of regulated companies. However, ceived from regulated companies, the agencies would have the specific reporting requirements of the agencies vary to obtain information from (1) stockholders holding stock considerably. Some agencies require regulated companies in their own name, (2) those holding stock as trustees or to submit information on a certain number of the largest in some other fiduciary capacity, and (3) trust beneficiaries stockholders, while others require information on all in order to identify who owns and who votes the stock. In stockholders owning more than a given percentage of a this connection, the Civil Aeronautics Board (CAB) has company's stock. gone further than the other regulatory agencies in reIn evaluating the effectiveness of the agencies' owner- quiring information from these parties. In essence, CAB ship reporting regulations, we initially concerned ourselves requires: with the question of whether the use of nominees by stockholders could impair the data received by the agen Regulated companies to submit annually the names of cies. Nominees are entities generally created for the sole persons owning more than 5 percent of any class of stock. purpose of representing persons or organizations that (1) Persons owning more than 5 percent of a company's hold stock in trust for others and either vote the stock at stock to report their holdings annually and to identify who their discretion or as directed by the trust beneficiary, had the power to vote the stock, and the name of the and/or (2) own and vote stock for their own account. Al- trustee if the stock was held in trust. though the stock is held in the name of the nominees, the stock, including the way the stock is voted at stockholders Trustees owning more than 5 percent of the stock to meetings, is controlled by the person or organization that report annually (1) the identity of each beneficial owner the nominee represents or by the trust beneficiary. and the stock held for each, (2) the stock held for the We examined a limited number of reports and applica- trustee's own account, and (3) who had the power to vote tions requiring ownership information. It appeared that the stock held by the trustee. . . for large regulated companies the names of nominees are In addition, CAB requires banks and stockbrokers to often shown in lieu of the names of stock owners. The report quarterly (1) the stock held as trustee and the numpresence of nominees in the ownership data was confirmed ber of accounts for which the stock is held, (2) the names of by officials of each of the agencies who told us that the the nominees holding the stock, and (3) the identity of any companies were not in a position to know who the stock person whose account contains 1 percent or more of any owners were. The officials stated that the companies could class of a regulated company's stock and the person who only report the names of the stockholders of record, which had the power to vote the shares. include nominees. We trust that the foregoing information and the data Using the nominee list published by the American previously provided to your staff is satisfactory to your Society of Corporate Secretaries we were able to identify needs. As you requested, we did not submit the information the person or organization the nominees represented. For developed by us to the regulatory agencies for comment. example, the 1972 annual report submitted to the Inter- Sincerely yours, state Commerce Commission by one of the country's ELMER B. STAATS, largest railroads included 24 nominees among the list of Comptroller General of the United States. REPORTING REQUIREMENTS OF SEVEN FEDERAL REGULATORY COMMISSIONS WITH RESPECT TO STOCK OWNERSHIP, CONTROL, DIVERSIFICATION, DEBT AND OFFICERS CIVIL AERONAUTICS BOARD Section 407(a) states that CAB is empowered to require annual, monthly, periodical and special reports from any The Civil Aeronautics Board (CAB) regulates the air carrier; to prescribe the manner and form in which economic aspects of air carriers' domestic and inter- Such reports shall be made; and to require from any air national operations with the objective of developing an carrier specific answers to all questions upon which CAB adequate air transportation system for the United States. may deem information to be necessary. In addition, CAB The basic legislative authority for all reporting require- may require any air carrier to file with it a copy of each ments imposed on air carriers by CAB is contained in or any contract, agreement, understanding, or arrangesections 204(a) and 407(a) of the Federal Aviation Act ment, between such air carrier and any other carrier or of 1958 (49 U.S.C. 1324(a) and 49 U.S.C. 1377 (a)). person. These sections of the Act are augumented by other Section 204(a) states that CAB is empowered to perform specific reporting requirements. such acts, to conduct such investigations, to issue and amend such orders, and to make and amend such general The information received by CAB is discussed below or special rules, regulations and procedure, pursuant to in the same sequence as the information requested in and consistent with the provisions of the Act, as it shall Senator Metcalf's letter of February 9, 1973 except for deem necessary to carry out the provisions of, and to the evaluation of the enforcement and effectiveness of exercise and perform its powers and duties under the Act. the rules and regulations which will be covered in the |