Imágenes de páginas
PDF
EPUB

pository participant for whom DTC holds stock in the portfolio corporation. The listing shows the number of shares in the portfolio company held for each depository participant.

Security Position Listings for all but three of the 122 corporations included in this study can be found in Appendix A, p. 293. The listings are of limited use for the purposes of this study, for the following

reasons:

(1) The quantity of shares kept by DTC for the various banks and brokers are holdings, with no indication as to the voting rights involved; and

(2) Brokers and banks may have other holdings in the portfolio corporations in accounts outside DTC.

The Security Position Listings do, however, indicate some of the holdings in the corporations of brokers, and of some of the banks on which the subcommittee does not have voting right data.

PREFERRED STOCKHOLDERS HAVE FULL VOTING RIGHTS IN ALMOST ONE FIFTH OF THE 122 CORPORATIONS

The subcommittee study reveals that preferred stockholders have significant voting rights in a number of major corporations. Preferred stockholders are empowered to vote regarding directors of the corporation and in all other matters coming before the annual meetings in 23-almost one fifth-of the 122 corporations included in this

survey.

Usually preferred stockholders are entitled, as common stockholders are, to one vote for each share, but there are exceptions. Holders of Southern California Edison Co.'s 11,350,198 shares of Cumulative Preferred Stock are entitled to three votes per share. Holders of three other issues of preferred or preference stock in Southern California Edison, and common stockholders, have one vote per share. The preferred stockholders in the California utility have 44 percent of the total votes in the corporation.

Preferred stockholders in IC Industries Inc. have one and a half votes per share; in R. J. Reynolds Industries, Inc. and Rio Grande Industries Inc. preferred stockholders have half a vote per share. In Trans World Airlines Inc. preferred stockholders have a full vote in election of the two directors selected only by preferred stockholders and one half vote in other matters. Preferred stockholders in the Chicago, Milwaukee Corp., with one vote per share, exclusively elect directors representing them. But they also can vote in selection of directors representing common stockholders and in other matters coming before the stockholders' meeting.

Corporations where preferred stockholders have limited voting power (such as Virginia Electric & Power Co., where they were limited in 1977 to voting on a matter regarding preferred stock) are not included in our list of companies in which preferred stockholders vote. The 23 companies in which preferred stockholders can vote in all matters coming before the annual meetings are listed below. They are ranked according to the percentage of the total votes which preferred stockholders were entitled to cast at annual meetings held in 1977:

TABLE II.-23 Corporations in which preferred stock has full voting rights

[merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][subsumed][merged small][subsumed][subsumed][subsumed][subsumed][merged small][merged small][merged small][merged small]

Railroads and electric utilities dominate this list of corporations in which preferred stockholders vote. There are six railroads and five electric utilities among the 23. Each of the seven corporations in which preferred stockholders have from 16 to 44 percent of the votes is either a railroad (4) or electric utility (3). The third major group represented is oil companies (4) led by Occidental Petroleum, in which preferred stockholders have 11 percent of the votes. The 23 corporations include only one insurance company (Travelers) and no banks.

EXTENT OF INCLUSION OF PREFERRED STOCKVOTERS IN THIS STUDY

This study includes-to the extent that they can be readily determined the voting rights of preferred stockholders in 10 of the 23 corporations. They are the seven in which preferred stockholders have the most voting rights-Southern California Edison Co. (44 percent of total votes), Rio Grande Industries Inc. (41 percent), IC Industries Inc. (30 percent), Southern Railway Co. (29 percent), Pacific Gas and Electric Co. (28 percent), Commonwealth Edison Co. (23 percent), Chicago Milwaukee Corp. (16 percent) and three others, Burlington Northern Inc., R. J. Reynolds Industries Inc. and Trans World Airlines Inc. Preferred stockholders have only 3 percent of the votes in the BN and 4 percent of the votes in the latter two corporations. They are included because it could be determined from reports filed with regulatory agencies that a company, in the case of the BN, an individual, in the case of R.J. Reynolds Industries Inc., and an individual in the case of Trans World Airlines Inc. held a significant bloc of votes through preferred stock.

Preferred voting rights in the 13 other corporations in which preferred stock has full voting rights were not tabulated because of the

difficulty in identifying preferred stockholders. Data on preferred stock are even more diffused than on common. Pacific Gas and Electric Co. has 14 different preferred issues. Consumers Power Co. and Commonwealth Edison Co. each have eight. Aggregation of this preferred voting power requires tabulation of many different listings. Computations must be made with caution because some of the preferred stock, even within a single company, may have more or less votes than common or even other preferred issues. Then the totals must in many cases be added, in accordance with the procedure used throughout by the subcommittee and Corporate Data Exchange, Inc. and described elsewhere (p. 26), to holdings of the various families, personal or corporate, which control stock through multiple institutions and accounts.

THREE LEVERS OF CONTROL-THE ROCKEFELLER ILLUSTRATION

In many cases preferred stock is held by the same institutions which hold the common stock. Usually no one holder-as distinguished from a group exercising common control over several accounts-has a large amount. That this is not always the case is illustrated by the case of Laurance Rockefeller. As late as 1976, he held the entire issue of Eastern Air Lines Inc.'s 3.75 percent convertible preferred stock, par $100. These 216,736 shares carried voting rights, and constituted more than 4 percent of the total votes in Eastern. He converted them in 1976 to 800,000 shares of common stock, of which he already had 49,400 shares in his own name and 75,600 shares in the name of Cudd & Co., a custodial account at Chase National Bank. These 925,000 shares of common give him 4.66 percent of the voting stock in Eastern. The Civil Aeronautics Board requires stockholders to report any interest of more than five percent of any class of capital stock or capital. Thus he was required to report his preferred stock holding when he held 100 percent of a particular class of stock. Now, with all his holdings in common stock, at a level slightly below the present 5 percent reporting benchmark, he will not be required to report his transactions to a government agency, unless he buys enough common stock to exceed the 5 percent benchmark.

He does not have to file insider transaction reports with the Securities and Exchange Commission because he is neither an officer nor director of the company. However, his family's financial adviser, Harper Woodward of Rockefeller Family & Associates, has for years represented Rockefeller family interests on the Eastern board. The bank headed by his brother David, Chase Manhattan-in which Rockefeller family interests are the major identified stockvoter-held $44,445,000 of Eastern's debt as of the end of 1976 in addition to $40,899,100 of unidentified debtholdings held for parties in nominee names. Beyond that, Chase held almost twice as much debt in the 25 major air carriers as any other bank. Chase loans to 13 carriers constituted 6.1 percent of all loans to air carriers by major lenders (banks and insurance companies) which held about 85 percent of airline debt.12 (See appendix C, p. 525.)

12 Debtholdings of banks may be understated by reports to the CAB. because of its acceptance of reports from carriers that Cede & Co. holds some of their debt. Banks whose debtholdings are identified may have additional debt issues in the Cede & Co. depository. Nor do the reported figures include airline debt which takes the form of equipment leasing.

Rockefeller interests thus have their hands directly on three principal levers of corporate control-stockvoting, debtholding and interlocking directorates of a major company within an industry indebted to the family-associated bank. But the power in one of those levers, stock voting in Eastern, will now be invisible, unless the CAB or SEC revise their ownership reporting systems. However, because the CAB-alone among the regulatory commissions-collects data on major debtholders of airlines it can be ascertained that Chase Manhattan also has a three-lever connection with Northwest Airlines Inc. Chase Manhattan holds 12.8 percent of all the debt which Northwest Airlines Inc. has with banks and insurance companies. Chase and Northwest's boards of directors are directly interlocked, through James H. Binger of Honeywell Inc. The bank also has a small voting interest in the airline.

INVESTOR INTERLOCKS THROUGH SUBSIDIARIES-THE KIRBY

ALLEGHANY-IDS ILLUSTRATION

Northwest Airlines Inc.'s board of directors illustrates a two-lever connection, not easily detected, between a company and an institutional investor. The largest identified stockvoter in Northwest, with 4.91 percent of the votes, is the Kirby Family Group, which controls the Alleghany Corporation, and its various subsidiaries These holdings represent the investment of a life insurance company and two mutual funds associated with Investors Diversified Services Inc., which is controlled by the Kirby-Alleghany interests.

Four directors of IDS subsidiaries Donald M. Kendall, Melvin R. Laird, Paul W. McCracken and Frederick L. Hovde sit on the boards of 15 major corporations, including eight in which IDS subsidiaries have significant voting interests. Among them is Northwest Airlines Inc., in which the Kirby group with 4.91 percent of the votes is the major stockvoter, and on whose board Laird sits. He is also on the board of Phillips Petroleum, in which the Kirby-Alleghany group has a small voting interest, as well as Metropolitan Life Insurance Co., Communications Satellite Corp., Purolator Services Inc. and Chicago Pneumatic Tool Co.

Kendall is the chief executive officer of Pepsico Inc., in which the Kirby group is a major stockvoter. He sits on the board of Atlantic Richfield Co., in which the Kirby group is the third largest identified. stockvoter, controlling 1.48 percent of the stock. He also serves on the board of Pan American World Airways.

Hovde sits on the boards of General Electric and Inland Steel, in which the Kirby group holds sizable blocks of stock, McCracken sits on the boards of K Mart Corp. (S. S. Kresge & Co.), Texas Instruments, Hoover Ball and Bearing and two firms in which the Kirby group has a significant voting interest, Consolidated Foods and Lincoln National Corp. The Kirby group's voting interest in Lincoln National Corp. is more than 2 percent, almost as much as the total holdings of the 46 insurance companies which invest in Lincoln National and far more than the holding of any other investment company.

The submissions to the regulatory agencies by neither the parent Alleghany Corp. nor the subsidiary, Investors Diversified Services

Inc., reveal the connections of members of boards of the third-tier companies on which Laird, Kendall, Hovde and McCracken sit. The possibilities for arranging self-dealing interlocks with corporations in which an institutional investment complex already has a stockvoting or debtholding position are endless for companies which-as the 122 in this study do have at least 2,259 subsidiaries and affiliates.

The Patman report of a decade ago referred to earlier (footnote 2, page 2) includes a wealth of information regarding voting power and interlocks of commercial banks, the major category of institutional investors. Excerpts from the Patman report appear in Appendix B, p. 469. A cautionary note: In comparing information in the Patman report and this study it should be remembered that some of the data in the Patman report refer to bank holdings. Data on banks in this study include only those holdings in which a bank has sole or shared voting authority.

A companion volume by the subcommittee, prepared in cooperation with the Senate Computer Center and soon to be published, will portray direct and indirect interlocks among the corporations under study here and others.

« AnteriorContinuar »