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Both the role of the shareholder and of the institutional on stockholder voting in connection with the establishinvestor are cogently set forth in James Willard Hurst's ment of the Bank of New York, are given on pp. 30–31. "The Legitimacy of the Business Corporation in the Law Herman, Edward S. and Carl F. Safanda. Proxy voting by of the United States, 1780–1970" from which the pages in
commercial bank trust departments. Banking Law Attachment B are taken.
Journal, v. 90, February 1973: 91-115. Listed are twenty items with brief annotations. The Berle and Means book, the works by Robert A. Gordon, department personnel and customers; approximately 300
Based largely on interviews with past and present trust James Willard Hurst, and Andrew Shonfield, and of course the article by David Ratner appear particularly signifi- during the period 1969-1972.
individuals representing sixty-five banks were interviewed cant. Baum, Daniel Jay and Ned B. Stiles. The silent partners, Hetherington, J. A.C. Fact and legal theory: shareholders, institutional investors and corporate control. Syra
managers, and corporate social responsibility. Stan
ford Law Review, v. 21, January 1969: 248–292. cuse, Syracuse University Press, 1965. 176 p.
Article deals largely with the relationship between manConsiderable discussion of proxies as related to institu- agers and shareholders. tional investors.
Hurst, James Willard. The legitimacy of the business corBerle, Adolf A., Jr. and Gardiner C. Means. The modern poration in the law of the United States, 1780–1970.
corporation and private property. New York, Com- Charlottesville, University Press of Virginia, 1970.
merce Clearing House, 1932. 396 p. A classic work on ownership and control in the modern A significant broad-gauged study. On voting rights see corporation. See especially Book 1, Chapter 5, “The especially pp. 49-50 concerning the development of the Evolution of Control,” pp. 69–118, and Book 2, Chapter 8, concept of proportionality of shares; on the role of stock"The Resultant Position of the Stockholder,” pp. 277–287. holder and the institutional investor, pp. 85-100. Frequent references to decline in voting power of stock- Livingston, J. A. The American stockholder. Philadelphia, holders.
J. B. Lippincott, 1958. 290 p Berle, Adolf A., Jr. Power without property, a new de- A popularly written book, with frequent references to
velopment in American political economy. New York, limitations of stockholder power, including voting rights.
Harcourt Brace, 1959. 184 p.
Manne, Henry G. Some theoretical aspects of share voting.
Columbia Law Review, v. 64, December 1964: 1427– 62–76 and 104-110.
1445. Cushing, Harry A. Voting trusts, a chapter in modern Makes comparisons between corporate voting pro
corporate history. New York, Macmillan, 1927. 257 p. cedures and political voting procedures. Provides a useful survey of the development of yoting Ralph Nader's Conference on Corporate Accountability. trusts, particularly among railroad corporations during periods of reorganization, in the 19th and early 20th
Corporate power in America. Edited by Ralph Nader
and Mark J. Green. New York, Grossman, 1973. century. Dewing, Arthur Stone. The financial policy of corporations. See especially chapter 6, "Corporate Democracy: Nice
5th edition. New York, Ronald Press, 1953. 2 vols. Work if You Can Get It" by John J. Flynn, pp. 94-110. See Chapter 4, “Fundamental rights of the corporation Ratner, David L. The government of business corporastockholder”, pp. 74-106, especially footnotes on pp.
tions: critical reflections on the rule of “one share, 75-77.
one vote.” Cornell Law Review, v. 56, November Florence, P. Sargant. The logic of British and American
1970: 1-56. industry, a realistic analysis of economic structure A critical evaluation of the "one share-one vote" and government. 3rd edition. London, Routledge and principle, almost universal in United States corporate Kegan Paul, 1972.413 p.
practice today, contrasted to the “one man, one vote" rule See especially Chapter 5, Sec. 2, “The Shareholders'
in governmental affairs. Actual Part in Government, Law and Reality”, pp. 211-221,
Author concludes that ... “the rule of 'one share, one and Sec. 3, “Government by Bloc-holder”, pp. 221–241.
vote' represents an aberration in historical development, Gordon, Robert Aaron. Business leadership in the large is widely departed from in other countries, facilitates
corporation. Washington, Brookings, 1945. 369 p. trafficking in control and the development of unhealthy Deals with "the relation between active entrepreneur-conglomerates, is vesting increasing power in the hands of ship and the 'control allegedly exercised by large stock- financial managers who have neither the desire nor the holders, bankers, and others." Especially relevant here are ability to exercise it, inhibits democratic decision making chapters 8, "The Role of the Stockholder”, pp. 156–188, on important social and economic issues, and is of dubious and 9, "The Influence and Leadership Activities of constitutionality.” (p. 44). Financial Groups”, pp. 189–221.
Shonfield, Andrew. Modern capitalism, the changing Harbrecht, Paul P. Pension funds and economic power. balance of public and private power. London, Oxford New York, Twentieth Century Fund, 1959.328 p.
University Press, 1965. 456 p. Discusses voting rights by banker trustees and related Discusses the limited role of stockholders in corporate issues on pp. 115–121, 248–250.
management, and particularly the role of large banks in Henderson, Carter F. and Albert C. Lasher. 20 million Germany in voting shares of stockholders held in trust.
careless capitalists. Garden City, N.Y., Doubleday, See especially pp. 246-2! , 378. 1967. 287 p.
Stevens, W. II. S. Stockholders' voting rights and the Numerous references in index to votes and voting, centralization of voting control. Quarterly Journal of largely related to proxy fights. Alexander Hamilton's views Economics, v. 40, May 1926: 353-392.
Stevens, W. H. S. Voting rights of capital stock and rations exercising quasi-public functions, such as bridge
shareholders. Journal of Business of the University of and road operations, became few in number in comparison Chicago, v. 11, October 1938: 311-348.
to corporations fulfilling purely private functions and The author recommends: 1. “The elimination of all public interest in the internal affairs of business corporapurely nonvoting issues and more general use of share-for
tions waned as did the public fear of corporations. The share yoting rights. 2. The further development of strong legislatures capitulated to the demands of those who variable voting controls where there are two or more sought voting strength in proportion to the risk taken. classes of stock, such controls to become effective promptly As early as 1886 it was generally provided by statute, or upon failure either to observe reasonably conservative by the articles, that each share should have one vote.' standards of management or to produce revenues. 3. The The end of stockholder voting equality meant recogniextension of the voting proxy system to all corporations
tion of the fact that the private corporation is basically regardless of whether there is more than one class of stock and fundamentally a profit-making device. While manor not and possible future inauguration of mail balloting.” agers of such corporations may be motivated by ambition,
creative impulse, and prestige more than personal profit,1 Timberg, Sigmund. Corporate fictions: logical, social and international implications. Columbia Law Review, insignificant exceptions, enter into the corporate venture
it is safe to assume that stockholders, on average and with v. 46, July 1946: 533-580.
for the cold, hard purpose of making a profit.!? In such a
я One "fiction” discussed is "that the controlling group situation, the amount of control granted to each stockwill is the will of the stockholders.” pp. 561-562.
holder should be related to the sum invested.
If the principle of apportioning voting power commenAttachment A
surate with pecuniary interest is accepted, then the theory From: SNEED, Earl. The STOCKHOLDER MAY Vote As He of self-interest in stockholder voting emerges with clarity
PLEASES: THEORY AND Fact; UNIVERSITY OF Pitts- and considerable validity.
Fron: Hurst, JAMES WILLIRD. Tue LEGITIMACY OF THE Neither the amount of investment nor the number of
BusixESS CORPORATION IN THE LAW OF THE UNITED shares made any difference; each shareholder had one
States, 1780–1970. CHARLOTTESVILLE, UNIVERSITY PRESS vote. This concept came from the English political of VIRGINIA, 1970. PP. 85–88. philosophy, which held that since each man was equally interested in good government, each man should have an
The stockholder's legitimating role was probably never equal voice in managing that government. An analogy
as the legend would have it, in those cases where a sizable was drawn between municipal and business corporations body of shareholders pooled assets to create a large enterand the latter inherited per capita voting.”
prise of_complex operations. Nicholas Biddle ran the Courts upheld this rule on the ground that it was best Second Bank of the United States through tight inside for the public interest. The contrary plan of one vote for control, while the generality of the bank's shareholders each share was condemned because it encouraged specula- acquiesced. In the second half of the nineteenth century tion and monopoly, lessened the rights of the smaller
the great railroad--the original model of the large indusstockholders, depreciated the value of their shares, and
trial corporation-was invariably the creation of some threw the whole government of the corporation into the strong, closely centered leadership, which set objectives hands of a few capitalists. Similar beliefs led legislatures and made decisions quite free of influence from most to place quantitative restrictions on voting strength. stockholders. A determnining factor was size; in big Sometimes a maximum of ten or twenty votes was pre
firms the practical pressures and opportunities for insider scribed. Or a complicated formula was evolved giving less autonomy produced similar results in the nineteenth and and less voting weight for each share as the size of the
twentieth centuries. On the other hand, the character of holdings increased.” Whatever the plan, the evident pur
investors shifted in the twentieth century in directions pose was to keep corporate control from crystallizing in
which peculiarly reinforced the withdrawal of stockholders the hands of the minority in number.
from such superintendence as would legitimate those in The policy of voting cquality was comparatively short- fact controlling large corporations. Investment in corpolived. By various devices stockholders secured voting rate debt and equity securities was still relatively uncompower related to the sum ventured. Before an election, a
mon into the late nineteenth century; in December 1886 stockholder, desiring to cast more votes than the com
issues listed on the New York Stock Exchange included mon law or the special charter would permit, would trans- only sixty railroads, four express companies, nine miscelfer sharcs to friends who would vote as the real owner
laneous corporations, and seventeen inactive stocks, and directed.? Such schemes soon became unnecessary. Corpo- 8 The classic recital of the change from public fear to public
cajolery of corporations is the famous dissent of J. Brandeis in ' 1 MorawETZ, Private CORPORATIONS § 476, at 449 (2d ed. Louis K. Liggeti Co. v. Lee, 288 U.S. 517, 541 (1933). See also Dopp, 1886).
AMERICAN BUSINESS CORPORATIONS UNTIL 1860, 393-95 (1954). 2 Williston, History of the Law of Business Corporations Before MORAWITZ, op. cit. supra note 1, at 449. 1800, 2 HARV. L. Rev. 105, 156 (1888).
10 VEBLEN, ABSENTEE OWNERSHIP AND BUSINESS ENTERPRISE : The cases are collected in 63 A.L.R. 1106 (1929).
84 (1923). See also DRUCKER, THE CONCEPT OF THE CORPORATION 3 * Tavlor v. (iriswold, 14 N.J.L. 222, 240 (Sup. Ct. 1834).
(1946); Berle, For Whom Corporate Managers Are Trustees, 45 . The schemes of proportionate voting adopted by the Virginia Harv. L. Rev. 1365 (1932). CJ. BERLE, THE 20TH CENTURY CAPand West Virginia legislatures in the 1860's are detailed in State er rel. ITALISTIC REVOLUTION 54-56, 132-33, 166–69 (19.54). Corporate Dewey Portland Cement Co. v. O'Brien, 96 S.E. 2d 171, 174 (W. Va. policies are now influenced by considerations other than monetary, 19:36). The line of Pennsylvania statutes is traced in Note, The e.g., national defense, forcign relations, and community responsiRight of Holders of "Non-l'oling" Shares to Vote on Increases of bilities, such as support for education. Capital Slock: Pennsylvania and Other State Constitutions, 95 U. PA. 112 DEWING, FINANCIAL POLICY OF CORPORATIONS 743 (5th L. REV. 203, 212 (1946).
ed. 1953); Dodd, Is Effective Enforcement of the Fiduciary Duties of & See 2 J. S. Davis, EssAYS IN THE EARLIER HISTORY OF AMER- Corporate Managers Practicable! 2 U. Chi. L. Rev. 194 (1935). ICAN CORPORATIONS 324 (1917).
12 Dodge v. Ford Motor Co., 204 Mich. 459, 170 N.W. 668 ; Williston, supra note 2, at 157.
altogether the array included shares of less than a dozen Thus, weakness bred from the strength of their investindustrial corporations. Investors in corporate shares ment positions might force them to be active rather than were likely to be businessmen looking for outlets for their passive shareholders. But as of the 1960's such a developsurplus earnings, who, while attracted by the limited- ment was speculative. Meanwhile the relative passivity commitment opportunities which the corporate form al- of these big investors underlined the general failure of lowed, had an entrepreneur's concern with the profit shareholding to supply the steady surveillance by which possibilities and records of the companies into which they stochholders were supposed to legitimate the power wielded put money. In contrast, as the roster of corporate share- in business corporations. holders rapidly expanded from 1900—especially in the 1920's and after World War II—more and more investors were salaried, wage-earning, and professional people, (From the Cornell Law Review, November 1970, Vol. 56, No. 1)
, whose concern was not with short-term profit but with assured income and long-term appreciation. This was not
THE GOVERNMENT OF BUSINESS CORPORA. an entrepreneurial-minded style of investment. Those of TIONS: CRITICAL REFLECTIONS ON THE this mind were even less likely than their nineteenth- RULE OF "ONE SHARE, ONE VOTE"* century predecessors to measure corporation management by short-term profits or to care to spend time or energy
(By David L. Ratnert) in close scrutiny of corporate operations.
(Copyright 1970–71 by Cornell University) Still another change in investment practice affected the place of shareholders in the governance of large corpora
Business corporations are the dominant institutions in tions. Through the mid-twentieth century increasing American society: The decisions of their managers shape millions of individuals invested in corporate securities
our present and future lives. The processes by which the at second remove by buying life and casualty insurance,
selection of those managers, and the decisions they make, creating trusts in care of bank trust departments, pur
are ratified or legitimized, are therefore of central imchasing mutual fund shares, and becoming participants portance. Scholars have devoted
thought to these processes in industrial pension funds set up through collective
but there has been almost no effort to relate that thought bargaining. By the 1960's the great institutional investors to existing or potential legal mechanisms for control. were the largest buyers of corporation bonds and, in re
This article is a tentative effort to cross that gap by sponse to a steady march of inflation, became substantial relating scholarly analysis of corporate government to a buyers of stoch. As the number of institutional investors particular legal datum—the rule of "one share, one vote.” increased, some prophets said that these investors, moved I have not attempted to erect a new framework, but have by their stahes and informed by their expertise, would rather made a series of thrusts at the rule from different begin to play in earnest the supervisory roles of the points of view, followed by an extremely preliminary legendary stockholder. But through the 1960's the record
consideration of alternatives. If the thrusts are wellshowed little to bear out the prophecies. The size of their directed, the subsequent erection of a new framework assets commanded respect when institutional investors
can be undertaken with more confidence about the footing. sought information; by their probing they introduced some fresh surveillance into corporate affairs. Nonetheless,
Overture: Games People Play the institutional investors generally behaved as individuals did; like individuals, they expressed dissatisfaction with
There are three games of Corporations. They are played the government of a corporation by selling out rather by different people, on different boards, and with different
rules. than by voting their shares for new men or different decisions. On rare occasions institutional investors cast
Corporations I is played on a board with fifty_squares, their weight for a change in top management; rarer was
called States. The players are called Corporation Lawyers, evidence of their influence brought to bear on particular
and they form themselves into teams, called Bar Associaissues of corporation policy. This abdication of the
tion Committees. There are two types of pieces used in stockholder's supervisory role perhaps derived from tra
the game small pieces called Businessmen and large ditions of trusteeship; institutional investors were trustees,
pieces called Corporations. The large pieces are carefully and fiduciary standards dictate that the trustee should designed by the Corporation Lawyers to look just
like the not by his own decisions put the assets in his charge at
Businessmen, except of course that they are much larger.
Within the States there are obstructions which sometimes business risk. A more powerful restraining influence was implied in the rapid increase in the size of such institutional
prevent the large pieces from moving in the direction that holdings. These stakes gave opportunity and occasion
the Corporation Lawyers want to move them. The object for intervening in the affairs of the corporation whose
of the game is to change the rules in each State to eliminate shares were held, but they also carried a heavy moral,
the obstructions. This process is called Modernizing the and in some outcomes perhaps a legal, responsibility for Corporation Laws. (Actually, it consists of substituting
nineteenth-century ideas for eighteenth-century ideas, but exercising such control as the shareholding might allow.
since the game became popular in the nineteenth century Already under responsibility to those for whose benefit they held shares, professional fund managers did not seem
the term Modernizing is still used.) The Corporation anxious to incur further responsibility to their fellow Lawyers who are proficient at this
game win large amounts shareholders in the companies in which they invested.
of money, but since all the teams are on the same side, At bottom, the position seemed unstable. Institutional
it is not a very interesting game to watch. investors' demand pressed hard on the supply of corporate large box called a Corporation. Inside the box are piles of
Corporations II is not played on a board, but with a securities. As their holdings became larger relative to supply, the possibility loomed that they might find *The initial work on this article was done in the summer of 1966 themselves unable to resolve their dissatisfactions with under a research grant from Cornell University.
| Professor of Law, Cornell University. A.B. 1952, L.L.B. 1955, corporate performance by selling out, lest they so dislocate
Harvard University, consultant to Subcommittee on Budgeting, the shares market as to cause unacceptable capital losses. Management and Expenditures.
money. One group of players is inside the box. They are leaving this to the by-laws. However, the charter of the called Insiders. The Insiders are allowed to take money, Mines Royal in 1568 provided for one vote for each quarter but there are rules as to how much money they can take, of a share, the total capital being divided into twenty-four or how fast or how far they can go, on any one move. shares. Since the project was a joint venture of EnglishThere are a few small holes cut in the box through which men and Germans, between whom there was some “fricplayers outside the box can watch the Insiders. If an tion and suspicion,” + this provision was presumably inoutside player thinks he sees one of the Insiders make an serted to assure continued English control of the operation, illegal move, he shouts "Breach of Fiduciary Duty!". An regardless of the number of German shareholders. outside player who shouts this is called a Strike Suiter. The charter of the Mineral and Battery Works, also Since the rules are not written down, a referee has to be granted in 1568, had voting provisions similar to those of called in to see whether the move was really illegal. If the Mines Royal. By 1574 it had produced an alleged the move was legal, the Insider can keep the money. If abuse of fiduciary duty by a controlling stockholder who the move was illegal, the Insider must put the money acquired between one-fifth and one-quarter of the shares back on the pile, and the referee then pays half of it to and used his voting power, together with allegedly frauduthe Strike Suiter. (Under the old rules, the Insider could lent accounts, to procure a reduction in the rent that he pay half to the Strike Suiter and keep the other half, and two other stockholders paid for property they leased without calling in the referee, but this is no longer per- from the company. mitted.) This game is a lot more fun to watch than the Not surprisingly, in the companies whose charters did
not specify the manner of voting, controversies arose when Corporations III is also played with a large open box, the result of the election would differ depending on whether called The Corporation. The box is kept in a luxuriously each shareholder had one vote or one vote for each share. appointed gaming hall, colloquially called a Think Tank, A principal issue in the controversy between the Smythe which is always found in an area with a very nice climate and Sandys factions for control of the Virginia and Somers and many recreation facilities. Inside the box are piles of Island Companies between 1618 and 1625 was whether money, and pieces of different shapes and sizes with such voting should be by ballot, in which case each member names as Workers, Shareholders, and Creditors. There is would have one votë, or by a poll in which members would also a group of players inside the box called Corporate be entitled to one vote for each share.? And in 1637,when Managers, who move the money and the pieces around in the members of the Merchant Adventurers, on a vote by some pattern. The other group of players, called Scholars, ballot, refused to accept the man “recommended” by are outside the box. They come into the gaming hall after King Charles I as the company's deputy in Rotterdam, tennis, or swimming, or skin diving, and watch the activi- "the King in Council ordered that, in future, no company ties of the Corporate Managers. Then they sit around a should use a ballot-box in the conduct of its business.”' 8 table and try to guess what rules the Corporate Managers By the latter part of the seventeenth century, it are following in making their moves. The Scholars who became more common to specify voting rights in the make the cleverest guesses are invited back to play another charter and three distinct patterns emerged. As Scott round at the expense of the gaming hall. Nobody is allowed describes it: to watch the game while it is being played, but the
On the one side, there were a number of commade by the Scholars are usually reported in special books with paper covers, which some people read.
panies in which there was no limitation, for
instance in the White Paper Makers, the SaltI
petre company, that for digging Mines and the
Hampstead Aqueducts each share entitled the Historical and Comparative Views
holder to one vote. On the other hand, while
there was no undertaking which followed what A. An Excursion into Antiquity
is said to have been the method of a regulated The Corporation textbooks do not say much about the
company, namely the decision of controverted development of the rule of one vote per share in business
questions by a poll of persons, the Bank of corporations. According to Ballantine, “[a]t common law
England approached near to this rule, since it each member (of a corporation) was entitled to one
was decreed that no member should have more vote, and no more," but this "rule was adopted with
than one vote. The difference lay in the fact that respect to public corporations and private corporations not
those, who owned less than £500 stock, had no having a capital stock, and at a time when joint stock cor
voting-power. Similarly in the Million Bank porations were unknown. ... It is generally expressly 31 W. Scott, THE CONSTITUTION AND FINANCE OF ENGLISH, provided : : : by a statute or by by-laws, that stock- SCOTTISH AND IRISH JOINT-STOCK COMPANIES TO 1720, at 162-63 holders shall have one vote for each share held by them.” I
3 SELECT CHARTERS OF TRADING COMPANIES 1530-1707, at 14-15 This explanation does not tell us much, and what it does
(Selden Soc'y ed. 1913). See also 1 W. Scott, supra note 2, at 163. tell us is misleading. The problem of shareholder voting was • SELECT CHARTERS OF TRADING COMPANIES 1530-1707, supra recognized at the earliest stages of the development of note 3, at xciv. business corporations in England, 400 years ago, and a
A return made in 1571 showed that 14 shares were owned by 22 variety of approaches were developed in response to eco
Englishmen, and the remaining 10 shares by an unspecified number
of Germans. 2 W. Scott, supra note 2, at 387. nomic and social needs over the succeeding years.
olid. at 58-59. “When one recollects the amount of discussion Through the early part of the seventeenth century, the that has centred round 'controlling interests'. in recent years, it is
not uninstructive to notice how soon the evil manifested itself." charters of the joint stock companies, each of which was
Id. at 59. specially granted by the King, generally made no special 72 id. at 266-88. Sandys also tried to introduce the ballot box at provision for the relationship of shares to voting rights, the election of the East India Company in 1619. Id. at 106.
81 id, at 228 (footnote omitted). It is tempting to infer from this *H. BALLANTINE, MANUAL OF CORPORATE LAW AND PRACTICE incident an historical affinity of autocrats for the "one share, one $ 171, at 573 (1930).
£300 of stock entitled the holder to one vote and
through this period; in Massachusetts bridge no one might have more than one. In the Royal
charters, which were notably free; and in ocLustring company 10 shares (£250) conferred
casional other charters, such as the congressional a single vote, which in this case also was the
charter to the bank of North America (1781). maximum allowed to each member. There was
From the outset, however, most charters speca third group which aimed at a compromise
ified voting rights. These were usually limited in between the extreme tendencies. Like the Bank
one way or another. A maximum of ten votes, or of England, £500 stock in the Greenland com
sometimes twenty, was common, and well-nigh pany gave a right to one vote, £1,000 stock to
universal in case of turnpike companies. Higher two, the latter being the maximum for any
maxima were common in insurance companies. person. According to the constitution of Barbon's
Frequently a complicated system was drawn up land bank, £300 stock qualified for two votes,
giving less and less weight per share as the size £500 stock for three votes, £1,000 stock for five
of the holdings increased. Alexander Hamilton, votes-the latter being the maximum. In the
arguing for such a scheme in his report on the company for smelting Iron with Pit-coal the
“National bank,” said: maximum was four votes, in the Scots Linen
A vote for each share renders a commanufacture five votes. In some cases, where no
bination between a few principal stockexpress maximum is mentioned, there was still a limit to the votes of any shareholder, arising
holders, to monopolize the power and
benefits of the bank, too easy. An equal out of the restriction which limited the amount of stock or shares that might be subscribed for
vote to each stockholder . allows not or owned by a member. Thus in the Bank of
that degree of weight to large stock
holders which it is reasonable they Scotland each £1,000 Scots carried one vote,
should have, and which, perhaps, their subject to the proviso that no one might take up
security, and that of the bank, require. more than £20,000 Scots; and in the society of
A prudent mean is to be preferred. White writing and printing Paper, while each five shares gave a vote, the maximum holding
The tendency was, however, for these limitations was 20 shares. The final step in this tendency, as
to be relaxed toward a simple vote per share basis. it existed in the seventeenth century, was made
This was done, probably invariably, at the reby the arter of the Old East India company
quest of the corporations, probably under pres(1698), which introduced a sliding scale, but not
sure from those who were or would be large a uniformly progressive one."
holders. And voting rights of one per share were
specified in occasional charters, notably in those The third pattern appears to have become the domi
of the Bank of North America (Pennsylvania nant one in English business companies during the
charter, 1782), the Massachusetts Bank (1784), eighteenth century, so that, while large shareholders were
the New Jersey manufacturing society (1791), almost always entitled to more votes than small share
and the New Haven Insurance Company holders, there was “njevertheless, almost universally, in
(1797). in order to prevent the concentration of control a relatively low maximum number of votes that any one
The restrictions on voting rights were at least in part proprietor might cast.” 10
attributable to widespread public concern that grants of In America, there were very few business corporations power to corporations and those who controlled them or joint stock companies in existence before the Revolu- would weaken democratic government.16 This concern may tion." One of the few was William Penn's Free Society have been reinforced by the “tendency to concentration of of Traders in Pennsylvania, chartered in England in ownership" already apparent at the end of the eighteenth 1682, in which shareholders not resident in Pennsylvania century, particularly in the more promising enterprises." were restricted to one vote, while those who owned at
The nineteenth century saw the gradual substitution of least 1,000 acres of inhabited land in the province were
general incorporation laws for private acts of incorporation. allowed two votes for two shares and three votes for six
l'he early general incorporation laws, however, showed the shares or more. 12
same variations as the special laws that preceded them.
New York's general law for manufacturing corporations, More than 300 private corporations for business pur
enacted in 1811, specified that "each stockholder shall be poses were chartered in the United States between the Revolution and 1801,13 of which two-thirds were transpor
entitled to as many votes as he owns shares of the stock of the said company.
." 18 and the Connecticut and tation or water companies or otherwise of a "quasi-public Michigan statutes of 1837 followed the same pattern," character.” \4 The charters evidenced the same variations as English companies of the same period:
while New Jersey provided for one vote per share unless
otherwise specified. However, New York's 1807 general Voting rights were usually not mentioned in incorporation law for turnpike companies specified one water company charters, where the rule of one vote for every share up to ten, and one vote for every five
vote for each proprietor may have been general shares above that,~ a provision which appears to have Id. at 340–41 (footnotes omitted).
15 2 J. Davis, supra note 11, at 323–24, quoting M. Clark & D. 10 A. DuBois, THE ENGLISH BUSINESS COMPANY AFTER THE HALL, BANK OF THE UNITED STATES 28 (1832) (emphasis in original) BUBBLE ACT 1720-1800, at 288 (1938). For specific examples sce (footnotes omitted). id. at 316-17 nn. 48-50.
16 2 J. DAVIS, supra note 11, at 304. 11 2 J. Davis, ESSAYS IN THE EARLIER HistorY OF AMERICAN 17 Id. at 302. CORPORATIONS 4 (1917).
18 Act of March 22, 1811, ch. 67, 83, (1811) NY. Laws 112. 12 1 id. at 42.
18 Act of June 10, 1837, ch. 63, § 9, (1836-37] Conn. Pub. Acts 49; 13 2 id. at 8.
Act of March 22, 1837, No. 121, $ 3, (1837) Mich. Laws 285. 14 Baldwin, Private Corporalions, in Two CENTURIES' GROWTH OF 20 Act of Feb. 25, 1846, § 11, (1846) N.J. Laws 66. AMERICAN Law 1701-1901, at 261, 276 (1901).
21 Act of March 13, 1807, ch. 38, (1807) N. Y. Laws 104.