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Chapter IX



There are several factors which help account for the tal Life is wholly owned by Transamerica Corporation; fact that only a single complete response was received in Continental Assurance Company is wholly owned by reply to the letter sent by Senator Metcalf to the 24 CNA Financial Corporation; Jefferson Standard Life is largest stock life insurance companies in 1970, ranked by wholly owned by Jefferson-Pilot Corporation (the latter assets.

owns 11.2 percent of the outstanding common stock of the CLAIM OF CONFIDENTIALITY

NCNB (banking) Corporation); Life Insurance Company

of Virginia is 99.5 percent owned by the Richmond CorSeventeen of the stock companies reported either that poration; State Farm Life Insurance Company is wholly the requested information was, in whole or in part, con- owned by State Farm Mutual Automobile Insurance fidential, or that the companies were subsidiaries of other Company; Life and Casualty Insurance Company of Tenfirms, or both. Thus, for example, Lincoln National Life

nessee is wholly owned by American General Insurance Insurance Company reported that it is wholly owned by Company of Houston, Texas. Eighty-five percent of the Lincoln National Corporation, and that information on stock of Equitable of Iowa is owned by a trustee of the individual holdings of the latter was considered private F. M. Hubbell Estate and individual members of the and confidentia).

Hubbell family or trusts created by them. Similarly Washington National Insurance Company is A special case is involved in the Teachers Insurance and wholly owned by Washington National Corporation, and Annuity Association which reports a single stockholder, a its reply indicated that stockholder records of the latter Special Act Membership Corporation called "Trustee of are confidential. However, it was reported that the T.I.A.A. Stock", as incorporated by the New York State Kendall family, trusts, and associates owned 60.3 percent Legislature in 1937. of the common stock of the Washington National Corporation as of February 15, 1972.

Franklin Life Insurance Company reported as public information that the Continental Corporation of New Five stock life insurance companies (Aetna, National York owned 5,711,624 or 27.1 percent of the 21,007,853 Life and Accident, American National, Kansas City Life, shares of its capital stock outstanding, and that the

and Southland Life) failed to respond to Senator Metcalf's second and third largest holders, not identified by name, letter. owned 1.32 and 1.25 percent of total stock, respectively; however, other holdings were considered confidential.

Travelers Corporation Connecticut General Insurance Company considered the information requested as confidential but did indicate that

This leaves as the only life insurance company whose the top 30 consisted of three long-term residents of Hart

response was complete enough for tabulation, the Travelers ford, two State retirement systems, an investment bank

Corporation of Hartford, Connecticut. The 30 largest ing house, and 24 bank nominees.

stockholders accounted for 34 percent of total shares of Seventy percent of all the stock of United Benefit Life

common stock of Travelers outstanding. The only holdings Insurance Company is owned by Mutual of Omaha, but

with 2 percent or more of total shares were those of three other holdings are considered confidential.

New York and two New England banks as follows: Nationwide Corporation reported two classes of common stock, each class having half of total voting power. Class A Morgan Guaranty..

6. O stock is publicly held, but names of holders are considered (through five nominces) confidential. Class B is owned by Nationwide Mutual In

State Street, Boston..

3. 8

(through nine nominees) surance Company and Nationwide Mutual Fire Insurance

Connecticut Bank, Hartford. Company.

Chase Manhattan... Four companies (Southwestern Life, Liberty National

(through two nominees) Life, Northwestern National Life, and Provident Life and

First National City...

2. O Accident Insurance) refused to divulge any stockholder information on the grounds of confidentiality.

It may be of passing interest to note that Travelers is Beyond those already referred to, the following com

one of five Connecticut companies that rank among the panies are wholly owned subsidiaries of others: Occiden- 50 largest life insurance companies of the United States.

Two are mutual companies, one other failed to respond, 1 It should be noted that many of the largest life insurance and one, Connecticut General, declined to give the companies are mutual companies. In fact 26 out of the 50 largest life requested information, but cited no reason under Coninsurance companies of the United States and six of the top seven are mutual companies. These six are: Prudential, Metropolitan,

necticut State law which might serve as justification for Equitable, New York Life, John Hancock, and Northwestern. its declining Senator Metcall's request,


3. 5 3. O

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Boston banks:

(Touchstone & Co.State Street

Bark & Co.

(Harwood & Co..
Hartford banks:
Connecticut Bank...

Johnson & Co..
Hartford National..

Dike & Co.--

Dark & Co.--
Minneapolis banks:
Northwestern National.--

PERC & Co...
New Jersey banks:

Fidelity Union Trust (Newark)- --- Saul & Co.
Chicago banks:
Harris Trust.

EMP & Co...
Pittsburgh banks:
Pittsburgh National.

Elm & Co.
Wilmingion banks:
Bank of Delaware.

Carothers &

California banks:
Bank of California --

Calpers & Co.
Cleveland banks:
Central National of Cleveland....

Parness & Co...

Nierrill Lynch, Pierce, Fenner & Smith Inc.

Nw York State Teachers Retirement.

The State Teachers Retirement Board of .


The Standard Investment Co..

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8, 075, 193

8, 075, 193

17. 8

1 Totals may not add due to rounding.

Chapter X



stocks, bonds, mortgages, or other securities of such One of the striking, but hardly surprising, conclusions corporation, if the publication is owned by a corporation that can be drawn from a study of the responses is the (39 U.S.C. 3685). willingness of companies to supply for a questionnaire

The Securities and Exchange Commission requires the information they are already required by law to make disclosure of holdings of executives and directors of corpublic, and correspondingly their reluctance in general to porations listed on security exchanges and of holdings of supply such information unless it is already in the public the beneficial owner of 10 percent or more of any class of domain. It confirms a widely recognized disinclination of securities of such corporations (15 U.S.C. 977aa). corporations to disclose financial information. As a This requirement was rarely cited as a factor in responsivecorollary, it is striking to notice the difference in stock- ness of reporting corporations. holder reporting requirements among the various agencies National banks are required to submit on request to of the Federal Government, a difference which unquestion- the Comptroller of the Currency a list of all shareholders ably affects the extent of informativeness of the various of such banks and the number of shares held by each. Such kinds of respondents."

information is not, however, received on any regular basis Thus, the Interstate Commerce Commission requires or maintained by the Comptroller. railroads and pipeline companies to submit, on form 109, The two Dallas banks among the top 50 both submitted "Voting Powers and Elections” their top 30 stockholders. lists of their 30 largest shareholders largely, no doubt, The same kind of information is required by the Federal since such information is required by Dallas County to be Communications Commission of communications com

on public record. panies. Therefore it is not surprising that the most com

Clearly such diverse reporting requirements make it plete returns were from companies in these fields: i.e. 15 of 19 railroads, 4 out of 5 communications companies, degree of response from the industries subject to the

difficult to expect any semblance of comparability of and the one pipeline company, The Interstate Commerce Commission requires of

different regulatory agencies of the Federal Government. trucking firms and other freight companies the submission

B. CONFIDENTIALITY of the top 10 stockholders. This but no more was supplied by 10 of 14 companies; two proved to be subsidiaries of other companies, and two supplied the full 30.

Most of the respondents, including almost all who Similarly, the Federal Power Commission requires majority of those who provided less than the top 30

refused to divulge any stockholder information, and the major electric and gas utilities to report their top 10 stockholders with the amounts of their holdings, claimed stockholders, and the Securities and Exchange Commission requires, under the Public Utility Holding Company

that the information requested was confidential and should

not be made public. There was a broad range of reasons Act of 1935, public utility holding companies to report cited. One company, Carolina Power and Light, indicated those stockholders with more than 1 percent of their stock. Under these provisions, out of 45 companies 10 sent

that it had reservations about identifying shareholders the list of 10 largest stockholders, and four sent in those

without their consent because of its “tremendous capital with 1 percent or more of the stock. Fifteen did send a full requirements for the 10 years ahead,” and thus "a grave report, ranking next to railroads and airlines in complete- interest in our Company."

concern about any action that would lessen investor ness of reporting. Fourteen of the remaining 16 sent in less information or no pertinent information. Two failed

Another, IBM, stated “We consider information on to respond.

individual stock holdings to be confidential, and that we The Civil Aeronautics Board, under section 407(b) of the

have a fiduciary responsibility to our stockholders to Federal Aviation Act, requires each airline to list the hold

protect this confidentiality. For example, the by-laws ers of 5 percent or more of its capital stock. This was done

of our corporation restrict the availability of this type of by three of the companies. However nine, out of 17, did

information even to our own stockholders." report fully; five gave a negative or no response.

Several banks cited Paragraphs 62 and 484 of the United Periodical publications are required to furnish the Postal

States Code, Title 12 (Banks and Banking), as grounds Service with the identity of the owning corporation and

for nondisclosure. These paragraphs read as follows: of persons owning 1 or more percent of the total amount of

Paragraph 62. List of Shareholders 1 See for example: Singhvi, Surendra S. Corporate management's inclination to disclose financial information. Financial Analysts Journal, v. 28, July-August, 1972: 66-73. This article presents the The president and cashier of every national case in support of the thesis that: “Corporate managements are banking association shall cause to be kept at all generally less inclined to disclose necessary information to the

times a full and correct list of the names and investing public if disclosure is left to their discretion." ? See Appendix A, p. 197 for a more extensive discussion of this

residences of all the shareholders in the associasubject.

tion, and the number of shares held by each, in


the office where its business is transacted. Such

one individual to that of another. The books of a list shall be subject to the inspection of all the

corporation are private. They are not public shareholders and creditors of the association,

records open to the inspection either of the public and the officers authorized to assess taxes under

or a creditor of one of the stockholders. * State authority, during business hours of each

It is of interest to note that there appears to be little day in which business may be legally transacted. A copy of such list, verified by the oath of such

consistency in the manner in which corporations con

sidered themselves constrained by these and similar president or cashier, shall be transmitted to the Comptroller of the Currency within 10 days of

statutory provisions on stockholders lists. General Motors

refused to divulge the information provided by Ford any demand therefore made by him.

Motor Company and Chrysler. IBM refused although

RCA reported fully. International Telephone and TeleParagraph 484. Limitation on Visitorial Powers

graph Corporation refused to give the information reNo bank shall be subject to any visitorial

quested, but General Telephone and Electronics reported

fully. Lockheed Aircraft Corporation refused; United powers other than such as are authorized by law, or vested in the courts of justice or such as shall

Aircraft reported fully. Most Ohio corporations refused be or shall have been exercised or directed by

to supply the requested information, but Cleveland

Electric Illuminating Company and Cook United, a Congress, or by either House thereof or by any committee of Congress or of either House duly

retailing Cleveland establishment, did. Three of the seven authorized

largest New York banks reported fully; four did not,

although some gave partial information. One Pennsylvania firm cited the Pennsylvania Business Considering the extent of response which was received Corporation Law, Paragraph 1308, Corporation records, in most industrial sectors, it seems probable that in many inspection, Section B of which reads:

instances the legal provisions cited by respondents were Every shareholder shall have a right to ex

used as an excuse for nondisclosure rather than being a amine, in person or by agent or attorney, at any

binding deterrent. reasonable time or times, for any reasonable

C. BANK HOLDINGS purpose, the share register, books or records or account, and records of the proceedings of the As the tabulations in this report make abundantly clear, shareholders and directors, and make extracts trust departments of banks, and especially of the large therefrom.

New York City banks, are conspicuous among the 30 This has been construed in Pennsylvania courts to

largest holders of most of the companies which responded mean that the right of inspection of corporation books is fully, or even in part, to Senator Metcalf's letter. This conopen only to one who is a bona fide shareholder in the centration of holdings suggests significant influence by corporation.

these banks in the management of the companies where The Ohio General Corporation Law, specifically Section they hold large blocks of stock. However, this is an area in 1701.37 C, was cited or referred to by most Ohio corpora

which there is a great deal of ignorance. tions as grounds for refusing to give the requested stock- In the first place, as the addendum on nominee accounts holder information. This section reads:

spellsout in greater detail (pp. 135–137), the holdings of bank Any shareholder of the corporation, upon writ

trust departments are of many different kinds. The Ameriten demand stating the specific purpose thereof,

can Society of Corporate Secretaries in its Nominee List

lists cight such categories: shall have the right to examine in person or by agent or attorney at any reasonable time and for (1) estates

(6) safekeeping or custody any reasonable and proper purpose, the articles

(2) living and testamen

accounts (domestic) of the corporation, its regulations, its books and

tary trusts

(7) safekeeping or custody records of account, minutes and records of share- (3) pension trusts

accounts (foreign) holders aforesaid, and voting trust agreements, if

(4) investment manage- (8) legal and common trust ment accounts

funds any, on file with the corporation, and to make copies or extracts thereof.

(5) corporate trust ac

counts As a result, none of the large tire and rubber companies is included in the group of fully reporting companies.

In the case of estates, living and testamentary trusts, It should be noted that these State laws literally deal

and legal and common trust funds (categories 1, 2, and 8), with disclosure to stockholders and not to nondisclosure

the bank trust department normally acts as executor, to nonstockholders. Only by implication is this nondis

administrator or trustee and thereby exercises all incidents closure in the legislation.

of legal ownership, including the power to exercise voting One respondent, Bormann's Inc., of Detroit, Michigan,

rights of the corporation stock shares it holds. In the case cited at some length from the opinion of the Delaware

of pension trusts (No. 3 above), similar rights and responCourt in the case of Allen v. Stewart, 7 Del Chancery 287,

sibilities of the bank may obtain. However, the trust in

struments often contain provisions reserving the voting as follows:

rights on stock so held to the management of the corporate * The requirement that transfers of stock creator of the trust, usually a designated management shall be made upon the books of the corporation group or pension committee. With respect to investment can by no possibility be of benefit to any other management accounts and domestic and foreign safeperson

than a stockholder of the corporation keeping or custody accounts (categories 4, 6, and 7 above), itself, for the simple reason that such transfers the bank acts in an agency or custodial capacity, and here are as secret and as private in their nature, so far the beneficial owners retain all voting rights with respect as the public is concerned, as would be the private to the stock so held. With respect to corporate trust acdelivery of a stock certificate from the pocket of counts (category 5 above), it was impossible to generalize.

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