unbearable pressure on the governmental authority to grant the permit," he said. LILCO has spent $55,000,000 on the Shoreham project of which little could be recovered if the plant were rejected by the Atomic Energy Com

mission.

Vic Reinemer, co-author with Sen. Lee Metcalf (DMont.) of the book: "Overcharge: How the Electric Utilities Exploit and Mislead the Public and What You Can Do About It," said of the LILCO-Stone & Webster links: "Every time somebody painfully puts together one of these profiles, it shows undue influence of economic power by half a dozen influential New York banks."

Former Federal Power Commission member Charles Ross said: "Unfortunately, this is the way the world of big business operates. It's not illegal as far as I know. From my standpoint, this is one of the most discouraging situations from a regulatory standpoint. You're trying to regulate from the point of view of cost of services. You're trying to make sure the consumer is getting the least costly product... It's the function of the regulator to act as if we had a free competitive society whereby everybody is out cutting each other's throats. When you have interlocks, human nature dictates you're going to try to minimize the risk involved."

29-553 O-74-27

THE LIBRARY OF CONGRESS, CONGRESSIONAL RESEARCH SERVICE, Washington, D.C., May 25, 1973.

To: Hon. Lee Metcalf. From: Julius Allen, Congressional Research Service. Subject: Literature relating to modification of the "One Share, One Vote" Rule in Corporation Voting. The references in this bibliography are divided into three general categories: (1) those on modifications of the "one share, one vote" rule in 18th and 19th century American experience; (2) those on foreign experience limiting the power of large stockholders; and (3) more general works that significantly raise issues of the powers of stockholders.

I. MODIFICATIONS OF THE "ONE Share, One VoTE" RULE IN 18TH AND 19TH CENTURY AMERICAN EXPERIENCE

It seems likely from a survey of relevant literature that the most articulate statement on this subject was made by Alexander Hamilton in his report on the National Bank communicated to the House of Representatives on December 14, 1790. In it he stated:

"A further consideration in favor of a change is the improper rule by which the right of voting for directors is regulated in the plan upon which the Bank of North America was originally constituted-namely, a vote for each share; and the want of a rule in the last charterunless the silence of it, on that point, may signify that every stockholder is to have an equal and single vote, which would be a rule in a different extreme, not less

erroneous. . .

"A vote for each share renders a combination between a few principal stockholders, to monopolize the power and benefits of the bank, too easy. An equal vote to each stockholder, however great or small his interest in the institution, allows not that degree of weight to large stockholders which it is reasonable they should have, and which, perhaps, their security and that of the bank require. A prudent mean is to be preferred.' Specifically, Hamilton's plan for the national bank called for the following voting rights provisions:

II. The number of votes to which each stockholder shall be entitled shall be according to the number of shares he shall hold, in the proportions following that is to say: For one share, and not more than two shares, one vote; for every two shares above two, and not exceeding ten, one vote; for every four shares above ten, and not exceeding thirty, one vote; for every six shares above thirty, and not exceeding

1 Reprinted in: The Works of Alexander Hamilton. Edited by Henry Cabot Lodge. New York, G. P. Putnam's Sons, 1904. v. 3. pp. 422-423.

sixty, one vote; for every eight shares above sixty, and not exceeding one hundred, one vote; and for every ten shares above one hundred, one vote; but no person, copartnership, or body politic shall be entitled to a greater number than thirty votes. And, after the first election, no share or shares shall confer a right of suffrage, which shall not have been holden three calendar months previous to the day of election. Stockholders actually resident within the United States, and none other, may vote in the elections by proxy."

No comparable statement by any other American statesman has been found.

However, there are several cases in which a one vote per shareholder or other modifications of one vote per share were common, particularly in government-regulated industries. Such modifications were less common in manufacturing industries. Chief references are the following: Cadman, John W. The corporation in New Jersey, business

and politics, 1791-1875. Cambridge, Mass., Harvard University Press, 1949. 462 p.

Extensive discussion of stockholder voting rights in Chapter 10, "Stockholders and Directors", particularly on pp. 307-312.

Davis, Joseph Stancliffe. Eighteenth century business corporations in the United States. [Essay No. 4] in Essays in the earlier history of American corporations, v. 2. Cambridge, Harvard University Press, 1917 419 p.

See especially pp. 323-326.

Dodd, Edwin Merrick. American business corporations until 1860, with special reference to Massachusetts. Cambridge, Harvard University Press, 1954. 524 p. A classic work on the early legal history of American corporations. Limitations on voting rights in corporations, largely those incorporated in Massachusetts, are cited on the following pages: banks: 202–203, 212-215; insurance companies: 219, 225, 293, 304-305, 309; manufacturing corporations: 230-232, 326; toll bridge companies: 237238, 241; turnpike companies: 243, 245; canal and river improvement companies: 249-257; transportation companies, including railroads: 259-260, 262, 328, 333n., 344. Sawyer, Henry W. III. The right of holders of "non-voting"

shares to vote on increase of capital stock: Pennsylvania and other state constitutions. University of Pennsylvania Law Review, v. 95, Dec. 1946: 203–213. See especially p. 212 for change in Pennsylvania statutes on corporate voting rights.

2 Same, p. 434.

Sneed, Earl. Stockholder votes in adverse interest. 1960. Consists of reprints of the following three articles: "The Stockholder May Vote as He Pleases: Theory and Fact," University of Pittsburgh Law Review, v. 22, October 1960: 23-54; "Stockholder Votes Motivated by Adverse Interest the Attack and the Defense", Michigan Law Review, v. 58, May 1960: 961-998; and "The Factors Affecting the Validity of Stockholder Votes in Adverse Interest," Oklahoma Law Review, v. 13, November 1960: 373-407.

The evolution of the one share-one vote rule is dealt with at the beginning of the first article, pp. 23-24. These pages are attached as Attachment A.

II. FOREIGN EXPERIENCE LIMITING THE Power of Large STOCKHOLDERS

No reference was found that provided a better overview in English of corporation law in foreign countries modifying the "one-share one-vote" rule than the David Ratner article cited below, p. 398.

For comparative purposes the following paragraphs give related information, and are a translation from a 1966 thesis of voting restrictions in the securities legislation of the European Common Market, "Stimmverbote in den Aktienrechten der EWG-Staaten" by Hellmut MeyerGiesow.

Legislation and governmental regulation determine the limits of the voting strength of the individual shareholder. As a general rule, the principle holds everywhere that the voting strength of the shareholder is proportional to the number of shares he owns: the larger his shareholdings, the greater the weight of his voting rights.

This basic principle suffers from exceptions through legal provisions that set upper limits to the voting strength of a stockholder, or require ownership of a minimum number of shares in order to qualify to vote. Thus under Belgian and Luxembourg law, no one shareholder may vote more stock than 20 percent of the issued capital stock or 40 percent of the capital stock represented at the shareholders' meeting. In France, articles of incorporation may set forth the top limit of shares eligible to be voted as well as the minimum required for participation in shareholders' meetings. In the organizational meeting, an individual shareholder is limited to a maximum of ten votes. Also in Germany the articles of incorporation can limit the maximum number of shares eligible for voting. A similar situation prevails in Holland. Only in Italy is no limitation of voting rights possible.1

There is a substantial literature, primarily in German, on the extent to which banks exercise proxy rights in voting shareholders' stock which they hold in trust. In

Meyer-Giesow, Hellmut. Stimmverbote in den Aktienrechten der EWG-Staaten. Munich, Bauknecht, 1966. pp. 5-6.

general, German banks play a much more dominant role in industrial management and control than do banks in most other European countries or even in the United States. The following references are divided into English language and German language publications. Most have annotations.

A. ENGLISH LANGUAGE PUBLICATIONS

Of the six following publications the last, by Detlev Vagts, is probably the most comprehensive and useful. Church, Edgar M. Business associations under French

law. New York, Fallon Law Book Co., 1960. 589 pp. On stockholder voting powers, see paragraph 351-352, pp. 427-431, and paragraph 385, p. 470.

de Sola Canizares, F. The rights of shareholders. International and Comparative Law Quarterly, v. 2, Part 4, October 1953: 564-578.

Includes a brief discussion on shareholders' right to vote under the law of various countries, excluding English speaking countries, on pp. 568-569. Cites laws of various countries.

Eckert, Dieter. Shareholder and management: a comparative view of some corporate problems in the United States and Germany. Iowa Law Review, v. 46, Fall 1960: 12-83.

Voting procedures in shareholder meetings discussed on pp. 29-37.

Falkenhausen, Bernhard v. and Ernst C. Steefel. Shareholders' rights in German corporations. American Journal of Comparative Law, v. 10, Autumn 1961: 407-431.

Stockholders' voting rights are discussed on pp. 411-12. Florence, P. Sargant. Ownership, control and success of

large companies: an analysis of English industrial

structure and policy, 1936-1951. London, Sweet and Maxwell, 1961. 279 p.

Includes a consideration of the relationship between voting rights and control of large British corporations. No discussion of "one share-one vote" rule. Considers differences among kinds of shareholders, including "personal, company, institution, nominee, and mixed." Vagts, Detlev F. Reforming the "modern" corporation: perspectives from the German. Harvard Law Review, v. 80, November 1966: 23-89.

A comprehensive survey of major elements in the structure and control of German corporations, with comparisons to the United States. Particularly relevant is Part IV, "Representing the Shareholder Constituency", pp. 48-64, which includes extensive discussion of the role of banks as spokesman for shareholders.

B. GERMAN LANGUAGE PUBLICATIONS

These publications deal with voting rights in West Germany, Switzerland, France, other countries of the European Common Market, and the United States. The most comprehensive and useful, comparing German and United States practices, are the two works by ErnstJoachim Mestmäcker and by Rudolf Wietholter. Böckli, Peter. Das Aktienstimmrecht und seine Ausübung durch Stellvertreter. Basel, Helbing & Lichtenhahn, 1961. 233 p.

A detailed thesis on voting rights of stockholders and their execution by proxies. See pp. 43-49 for Swiss statutory limitations on stockholders' voting rights.

Busse, Andreas. Depotstimmrecht der Banken. Wiesbaden, Betriebswirtschaftlicher Verlag Dr. Th. Gabler, 1962. 220 p.

A comprehensive treatise on voting rights exercised by banks in Germany; their significance to industry, banks, competition among banks and to stockholders. The divergence of interest between small and large shareholders is stressed.

Goehrmann, Peter. Das Informations- und Stimmrecht. des Aktionärs im neuen französischen Gesellschaftsrecht. Berlin, 1969. 383 p.

A dissertation on information and voting rights of stockholders under the new French legislation of 1966. Includes a comparison of French and German law on voting rights of stockholders, including limitations of the one-share onevote rule, pp. 150-210.

Horn, Arno. Zum Mitverwaltungs- und Kontrollrecht der Aktionäre. Die Aktiengesellschaft, v. 14, December

1969: 369-374.

A convenient survey of stockholder rights in Germany, including voting rights.

Kutzenberger, Gerhard. Mitbestimmung der Aktionäre; ein wirtschaftswissenschaftlicher Beitrag zur Aktienrechtsreform. Berlin, Duncker & Humblot, 1964. 250 p.

Thesis on the role of stockholders in corporate management. Voting rights are extensively discussed. Comprehensive bibliography on pp. 229-250. Mestmäcker, Ernst-Joachim. Verwaltung, Konzerngewalt

und Rechte der Aktionäre, eine rechtsvergleichende Untersuchung nach deutschem Aktienrecht und dem Recht der Corporations in den Vereinigten Staaten. Karlsruhe, Verlag C. F. Muller, 1958. 399 p. Work is a comparative legal study of the management and authority of corporations as related to rights of shareholders in Germany and the United States.

Includes extensive references to voting rights. See especially p. 11, where in essence the "one share one vote" doctrine is defended; pp. 44-47 which discussses elections of the board of directors in U.S. corporations; pp. 60-65 on proxy voting in the United States, and limited authority of stockholders, pp. 92-95 for German voting practices of stockholders; including proxy authority of banks.

Meyer-Giesow, Hellmut. Stimmverbote in den Aktienrechten der EWG-Staaten. Munich, G. Bauknecht, 1966. 172 p.

A dissertation on limitations on stockholder voting rights in the European Economic Community. Püttner, Günter. Das Depotstimmrecht der Banken. (Ber

liner Juristische Abhandlungen, Band 7). Berlin. Duncker & Humblot, 1963. 174 p.

A detailed survey of the problem of banks' voting rights on behalf of stockholders. Includes extensive bibliography, pp. 165-174.

Tiling, Johann. Die Macht des Aktionärs in der Generalversammlung der französischen Aktiengesellschaft. Hamburg, Cram, de Gruyter & Co., 1965. 133 p.

A dissertation on the powers of shareholders in annual meetings of French corporations. Limitations on one share one vote rule are described on pp. 69–73. Vallenthin, Wilhelm. Die Stimmrechtsvertretung durch Banken nach dem Aktiengesetz von 1965. Frankfurt am Main, Fritz Knapp Verlag, 1966. 60 p.

A treatise defending for the most part banks' voting rights on behalf of stockholders. Wiethölter, Rudolf. Interessen und Organisation der Aktiengesellschaft im amerikanischen und deutschen Recht. Karlsruhe, Verlag C. F. Müller, 1961. 362 pp. A comprehensive legal study comparing corporate organization and interests in the United States and Germany. Comprehensive bibliography on pp. 342-362.

See especially pp. 131-139, which discusses "shareholder democracy" vs. "capital share democracy".

III. BASIC WORKS IN ENGLISH ON VARIOUS ASPECTS OF STOCKHOLDER VOTING POWER AND INFLUENCE IN CORPORATION MANAGEMENT, WITH PARTICULAR REFERENCE TO BANKS

A number of the references raise issues on the extent of, or lack of, bank influence in corporate policy that should Harbrecht in his 1959 study, "Pension Funds and Ecobe considered in more detail. Thus, for example, Paul P. nomic Power", issued by the Twentieth Century Fund, notes:

It is quite likely that certain large New York banks will soon approach a point where their combined holdings of stocks for pension funds could give their opinions considerable weight in the councils of the larger corporations. While it is the policy of many large corporations to include provisions in their pension plans to prevent their funds from gaining control of other corporations, no such restrictive policy has yet been announced by the banks. Unquestionably, they will seek to spread their stock investments widely to stave off acquiring the responsibility of corporate direction as long as possible. But as the stock purchases of the pension funds continue to grow, we can anticipate that at some time in the not-too-distant future the banker-trustees are going to be faced with an uncomfortable choice. They will have to buy into a position of authority in the larger corporations or reject profitable investments in order to avoid the responsibilities that accompany large shareholdings.1

In a similar vein, David Ratner in 1970 wrote:

It would hardly lie in the mouths of the institutional managers to complain about being deprived of votes that they have so clearly indicated they do not want. Reducing the voting power of large blocks of shares might actually make their investment job easier. As these institutions grow to mammoth size, they find their opportunities for equity investments limited to the very largest publicly-held corporations, which are the only ones in which they can invest their millions without finding themselves, willy-nilly, in control because of the number of votes they can cast. If they could purchase larger percentage interests in smaller companies without automatically acquiring the control position they say they do not want, the access of the smaller companies to the principal equity capital markets might be improved.

Harbrecht, Paul P. Pension funds and economic power. New York, Twentieth Century Fund, 1959, p. 248.

Ratner, David L. The government of business corporations; critical reflections on the rule of "one share, one vote." Cornell Law Review, v. 56, November 1970, p. 49. (Professor Ratner's article is reprinted in this appendix, beginning on p. 398.)