Lapas attēli
PDF
ePub

Chapter IX

LIFE INSURANCE COMPANIES

There are several factors which help account for the fact that only a single complete response was received in reply to the letter sent by Senator Metcalf to the 24 largest stock life insurance companies in 1970, ranked by assets.1

CLAIM OF CONFIDENTIALITY

Seventeen of the stock companies reported either that the requested information was, in whole or in part, confidential, or that the companies were subsidiaries of other firms, or both. Thus, for example, Lincoln National Life Insurance Company reported that it is wholly owned by Lincoln National Corporation, and that information on individual holdings of the latter was considered private and confidential.

Similarly Washington National Insurance Company is wholly owned by Washington National Corporation, and its reply indicated that stockholder records of the latter are confidential. However, it was reported that the Kendall family, trusts, and associates owned 60.3 percent 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 York owned 5,711,624 or 27.1 percent of the 21,007,853 shares of its capital stock outstanding, and that the second and third largest holders, not identified by name, owned 1.32 and 1.25 percent of total stock, respectively; however, other holdings were considered confidential. Connecticut General Insurance Company considered the information requested as confidential but did indicate that the top 30 consisted of three long-term residents of Hartford, two State retirement systems, an investment banking house, and 24 bank nominees.

Seventy percent of all the stock of United Benefit Life Insurance Company is owned by Mutual of Omaha, but other holdings are considered confidential.

Nationwide Corporation reported two classes of common stock, each class having half of total voting power. Class A stock is publicly held, but names of holders are considered confidential. Class B is owned by Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company.

Four companies (Southwestern Life, Liberty National Life, Northwestern National Life, and Provident Life and Accident Insurance) refused to divulge any stockholder information on the grounds of confidentiality.

Beyond those already referred to, the following companies are wholly owned subsidiaries of others: Occiden

It should be noted that many of the largest life insurance companies are mutual companies. In fact 26 out of the 50 largest life insurance companies of the United States and six of the top seven are mutual companies. These six are: Prudential, Metropolitan, Equitable, New York Life, John Hancock, and Northwestern.

tal Life is wholly owned by Transamerica Corporation; Continental Assurance Company is wholly owned by CNA Financial Corporation; Jefferson Standard Life is wholly owned by Jefferson-Pilot Corporation (the latter owns 11.2 percent of the outstanding common stock of the NCNB (banking) Corporation); Life Insurance Company of Virginia is 99.5 percent owned by the Richmond Corporation; State Farm Life Insurance Company is wholly owned by State Farm Mutual Automobile Insurance Company; Life and Casualty Insurance Company of Tennessee is wholly owned by American General Insurance Company of Houston, Texas. Eighty-five percent of the stock of Equitable of Iowa is owned by a trustee of the F. M. Hubbell Estate and individual members of the Hubbell family or trusts created by them.

A special case is involved in the Teachers Insurance and Annuity Association which reports a single stockholder, a Special Act Membership Corporation called "Trustee of T.I.A.A. Stock", as incorporated by the New York State Legislature in 1937.

[blocks in formation]
[blocks in formation]

Chapter X

GENERAL OBSERVATIONS

A. INFORMATION DISCLOSED

One of the striking, but hardly surprising, conclusions that can be drawn from a study of the responses is the willingness of companies to supply for a questionnaire information they are already required by law to make public, and correspondingly their reluctance in general to supply such information unless it is already in the public domain. It confirms a widely recognized disinclination of corporations to disclose financial information.1 As a corollary, it is striking to notice the difference in stockholder reporting requirements among the various agencies of the Federal Government, a difference which unquestionably affects the extent of informativeness of the various kinds of respondents.2

Thus, the Interstate Commerce Commission requires railroads and pipeline companies to submit, on form 109, "Voting Powers and Elections" their top 30 stockholders. The same kind of information is required by the Federal Communications Commission of communications companies. Therefore it is not surprising that the most complete returns were from companies in these fields: i.e. 15 of 19 railroads, 4 out of 5 communications companies, and the one pipeline company.

The Interstate Commerce Commission requires of trucking firms and other freight companies the submission 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.

Similarly, the Federal Power Commission requires major electric and gas utilities to report their top 10 stockholders, and the Securities and Exchange Commission requires, under the Public Utility Holding Company Act of 1935, public utility holding companies to report those stockholders with more than 1 percent of their stock. Under these provisions, out of 45 companies 10 sent the list of 10 largest stockholders, and four sent in those with 1 percent or more of the stock. Fifteen did send a full report, ranking next to railroads and airlines in completeness of reporting. Fourteen of the remaining 16 sent in less information or no pertinent information. Two failed to respond.

The Civil Aeronautics Board, under section 407(b) of the Federal Aviation Act, requires each airline to list the holders of 5 percent or more of its capital stock. This was done by three of the companies. However nine, out of 17, did report fully; five gave a negative or no response.

Periodical publications are required to furnish the Postal Service with the identity of the owning corporation and of persons owning 1 or more percent of the total amount of

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 case in support of the thesis that: "Corporate managements are generally less inclined to disclose necessary information to the investing public if disclosure is left to their discretion."

See Appendix A, p. 197 for a more extensive discussion of this subject.

stocks, bonds, mortgages, or other securities of such corporation, if the publication is owned by a corporation (39 U.S.C. 3685).

The Securities and Exchange Commission requires the disclosure of holdings of executives and directors of corporations listed on security exchanges and of holdings of the beneficial owner of 10 percent or more of any class of securities of such corporations (15 U.S.C. ¶77aa). This requirement was rarely cited as a factor in responsiveness of reporting corporations.

National banks are required to submit on request to the Comptroller of the Currency a list of all shareholders of such banks and the number of shares held by each. Such information is not, however, received on any regular basis or maintained by the Comptroller.

The two Dallas banks among the top 50 both submitted lists of their 30 largest shareholders largely, no doubt, since such information is required by Dallas County to be on public record.

Clearly such diverse reporting requirements make it degree of response from the industries subject to the difficult to expect any semblance of comparability of different regulatory agencies of the Federal Government.

B. CONFIDENTIALITY

Most of the respondents, including almost all who refused to divulge any stockholder information, and the

majority of those who provided less than the top 30 stockholders with the amounts of their holdings, claimed not be made public. There was a broad range of reasons that the information requested was confidential and should cited. One company, Carolina Power and Light, indicated that it had reservations about identifying shareholders without their consent because of its "tremendous capital requirements for the 10 years ahead," and thus "a grave concern about any action that would lessen investor interest in our Company."

Another, IBM, stated "We consider information on individual stock holdings to be confidential, and that we have a fiduciary responsibility to our stockholders to protect this confidentiality. For example, the by-laws of our corporation restrict the availability of this type of information even to our own stockholders."

Several banks cited Paragraphs 62 and 484 of the United States Code, Title 12 (Banks and Banking), as grounds for nondisclosure. These paragraphs read as follows:

Paragraph 62. List of Shareholders.

The president and cashier of every national banking association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in

the office where its business is transacted. Such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under State authority, during business hours of each day in which business may be legally transacted. A copy of such list, verified by the oath of such president or cashier, shall be transmitted to the Comptroller of the Currency within 10 days of any demand therefore made by him.

Paragraph 484. Limitation on Visitorial Powers

No bank shall be subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by Congress, or by either House thereof or by any committee of Congress or of either House duly authorized.

One Pennsylvania firm cited the Pennsylvania Business Corporation Law, Paragraph 1308, Corporation records, inspection, Section B of which reads:

Every shareholder shall have a right to examine, in person or by agent or attorney, at any reasonable time or times, for any reasonable purpose, the share register, books or records or account, and records of the proceedings of the shareholders and directors, and make extracts therefrom.

This has been construed in Pennsylvania courts to mean that the right of inspection of corporation books is open only to one who is a bona fide shareholder in the corporation.

The Ohio General Corporation Law, specifically Section 1701.37 C, was cited or referred to by most Ohio corporations as grounds for refusing to give the requested stockholder information. This section reads:

Any shareholder of the corporation, upon written demand stating the specific purpose thereof, shall have the right to examine in person or by agent or attorney at any reasonable time and for any reasonable and proper purpose, the articles of the corporation, its regulations, its books and records of account, minutes and records of shareholders aforesaid, and voting trust agreements, if any, on file with the corporation, and to make copies or extracts thereof.

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

It should be noted that these State laws literally deal with disclosure to stockholders and not to nondisclosure to nonstockholders. Only by implication is this nondisclosure in the legislation.

One respondent, Bormann's Inc., of Detroit, Michigan, cited at some length from the opinion of the Delaware Court in the case of Allen v. Stewart, 7 Del Chancery 287, as follows:

*The requirement that transfers of stock shall be made upon the books of the corporation can by no possibility be of benefit to any other person than a stockholder of the corporation itself, for the simple reason that such transfers are as secret and as private in their nature, so far as the public is concerned, as would be the private delivery of a stock certificate from the pocket of

one individual to that of another. The books of a corporation are private. They are not public records open to the inspection either of the public or a creditor of one of the stockholders.*** It is of interest to note that there appears to be little consistency in the manner in which corporations considered themselves constrained by these and similar statutory provisions on stockholders lists. General Motors refused to divulge the information provided by Ford Motor Company and Chrysler. IBM refused although RCA reported fully. International Telephone and Telegraph Corporation refused to give the information requested, but General Telephone and Electronics reported fully. Lockheed Aircraft Corporation refused; United Aircraft reported fully. Most Ohio corporations refused to supply the requested information, but Cleveland Electric Illuminating Company and Cook United, a retailing Cleveland establishment, did. Three of the seven largest New York banks reported fully; four did not, although some gave partial information.

Considering the extent of response which was received in most industrial sectors, it seems probable that in many instances the legal provisions cited by respondents were used as an excuse for nondisclosure rather than being a binding deterrent.

C. BANK HOLDINGS

As the tabulations in this report make abundantly clear, trust departments of banks, and especially of the large New York City banks, are conspicuous among the 30 largest holders of most of the companies which responded fully, or even in part, to Senator Metcalf's letter. This concentration of holdings suggests significant influence by these banks in the management of the companies where they hold large blocks of stock. However, this is an area in which there is a great deal of ignorance.

In the first place, as the addendum on nominee accounts spells out in greater detail (pp. 135-137), the holdings of bank trust departments are of many different kinds. The American Society of Corporate Secretaries in its Nominee List lists eight such categories:

[blocks in formation]

In the case of estates, living and testamentary trusts, and legal and common trust funds (categories 1, 2, and 8), the bank trust department normally acts as executor, administrator or trustee and thereby exercises all incidents of legal ownership, including the power to exercise voting of pension trusts (No. 3 above), similar rights and responrights of the corporation stock shares it holds. In the case sibilities of the bank may obtain. However, the trust instruments often contain provisions reserving the voting rights on stock so held to the management of the corporate creator of the trust, usually a designated management group or pension committee. With respect to investment management accounts and domestic and foreign safekeeping or custody accounts (categories 4, 6, and 7 above), the bank acts in an agency or custodial capacity, and here the beneficial owners retain all voting rights with respect to the stock so held. With respect to corporate trust accounts (category 5 above), it was impossible to generalize.

« iepriekšējāTurpināt »