Business Adventures

by John Brooks

  Both Mrs. Soss and Mr. Gilbert were present at Cobo Hall. Indeed, the meeting had barely got under way before Mr. Gilbert was on his feet complaining that several resolutions he had asked the company to include in the proxy statement and the meeting agenda had been omitted from both. Mr. Kappel—a stern-looking man with steel-rimmed spectacles, who was unmistakably cast in the old-fashioned, aloof corporate mold, rather than the new, more permissive one—replied shortly that the Gilbert proposals had referred to matters that were not proper for stockholder consideration, and had been submitted too late, anyhow. Mr. Kappel then announced that he was about to report on company operations, whereupon the eighteen other directors filed off the platform. Evidently, they had been there only to be introduced, not to field questions from stockholders. Exactly where they went I don’t know; they vanished from my field of vision, and I wasn’t enlightened when, later on in the meeting, Mr. Kappel responded to a stockholder’s question as to their whereabouts with the laconic statement “They’re here.” Going it alone, Mr. Kappel said in his report that “business is booming, earnings are good, and the prospect ahead is for more of the same,” declared that A.T. & T. was eager for the Federal Communications Commission to get on with its investigation of telephone rates, since the company had “no skeletons in the closet,” and then painted a picture of a bright telephonic future in which “picture phones” will be commonplace and light beams will carry messages.

  When Mr. Kappel’s address was over and the management-sponsored slate of directors for the coming year had been duly nominated, Mrs. Soss rose to make a nomination of her own—Dr. Frances Arkin, a psychoanalyst. In explanation, Mrs. Soss said that she felt A.T. & T. ought to have a woman on its board, and that, furthermore, she sometimes felt some of the company’s executives would be benefited by occasional psychiatric examinations. (This remark seemed to me gratuitous, but the balance of manners between bosses and stockholders was subsequently redressed, at least to my mind, at another meeting, when the chairman suggested that some of his firm’s stockholders ought to see a psychiatrist.) The nomination of Dr. Arkin was seconded by Mr. Gilbert, although not until Mrs. Soss, who was sitting a couple of seats from him, had reached over and nudged him vigorously in the ribs. Presently, a professional stockholder named Evelyn Y. Davis protested the venue of the meeting, complaining that she had been forced to come all the way from New York by bus. Mrs. Davis, a brunette, was the youngest and perhaps the best-looking of the professional stockholders but, on the basis of what I saw at the A.T. & T. meeting and others, not the best informed or the most temperate, serious-minded, or worldly-wise. On this occasion, she was greeted by thunderous boos, and when Mr. Kappel answered her by saying, “You’re out of order. You’re just talking to the wind,” he was loudly cheered. It was only then that I understood the nature of the advantage that the company had gained by moving its meeting away from New York: it had not succeeded in shaking off the gadflies, but it had succeeded in putting them in a climate where they were subject to the rigors of that great American emotion, regional pride. A lady in a flowered hat who said she was from Des Plaines, Illinois, emphasized the point by rising to say, “I wish some of the people here would behave like intelligent adults, rather than two-year-olds.” (Prolonged applause.)

  Even so, the sniping from the East went on, and by three-thirty, when the meeting had been in session for two hours, Mr. Kappel was clearly getting testy; he began pacing impatiently around the platform, and his answers got shorter and shorter. “O.K., O.K.” was all he replied to one complaint that he was dictatorial. The climax came in a wrangle between him and Mrs. Soss about the fact that A.T. & T., although it had listed the business affiliations of its nominees for director in a pamphlet that was handed out at the meeting, had failed to list them in the material mailed out to the stockholders, the overwhelming majority of whom were not at the meeting and had done their voting by proxy. Most other big companies make such disclosures in their mailed proxy statements, so the stockholders were apparently entitled to a reasonable explanation of why A.T. & T. had failed to do so, but somewhere along the way reason was left behind. As the exchange progressed, Mrs. Soss adopted a scolding tone and Mr. Kappel an icy one; as for the crowd, it was having a fine time booing the Christian, if that is what Mrs. Soss represented, and cheering the lion, if that is what Mr. Kappel represented. “I can’t hear you, sir,” Mrs. Soss said at one point. “Well, if you’d just listen instead of talking—” Mr. Kappel returned. Then Mrs. Soss said something I didn’t catch, and it must have been a telling bit of chairman-baiting, because Mr. Kappel’s manner changed completely, from ice to fire; he began shaking his finger and saying he wouldn’t stand for any more abuse, and the floor microphone that Mrs. Soss had been using was abruptly turned off. Followed at a distance of ten or fifteen feet by a uniformed security guard, and to the accompaniment of deafening booing and stamping, Mrs. Soss marched up the aisle and took a stand in front of the platform, facing Mr. Kappel, who informed her that he knew she wanted him to have her thrown out and that he declined to comply.

  Eventually, Mrs. Soss went back to her seat and everybody calmed down. The rest of the meeting, given over largely to questions and comments from amateur stockholders, rather than professional ones, was certainly less lively than what had gone before, and not noticeably higher in intellectual content. Stockholders from Grand Rapids, Detroit, and Ann Arbor all expressed the view that it would be best to let the directors run the company, although the Grand Rapids man objected mildly that the “Bell Telephone Hour” couldn’t be received on television in his locality anymore. A man from Pleasant Ridge, Michigan, spoke up for retired stockholders who would like A.T. & T. to plow less of its earnings back into expansion, so that it could pay higher dividends. A stockholder from rural Louisiana stated that when he picked up his telephone lately, the operator didn’t answer for five or ten minutes. “Ah brang it to your attention,” the Louisiana man said, and Mr. Kappel promised to have somebody look into the matter. Mrs. Davis raised a complaint about A.T. & T.’s contributions to charity, giving Mr. Kappel the opportunity to reply that he was glad the world contained people more charitable than she. (Tax-exempt applause.) A Detroit man said, “I hope you won’t let the abuse you’ve been subjected to by a few malcontents keep you from bringing the meeting back to the great Midwest again.” It was announced that Dr. Arkin had been defeated for a seat on the board, since she had received a vote of only 19,106 shares against some four hundred million, proxy votes included, for each candidate on the management slate. (By approving the management slate, a proxy voter can, in effect, oppose a floor nomination, even though he knows nothing about it.) And that was how the 1966 annual meeting of the world’s largest company went—or how it went until five-thirty, when all but a few hundred stockholders had left, and when I headed for the airport to catch a plane back to New York.

  THE A.T. & T. meeting left me in a thoughtful mood. Annual meetings, I reflected, can be times to try the soul of an admirer of representative democratic government, especially when he finds himself guiltily sympathizing with the chairman who is being badgered from the floor. The professional stockholders, in their wilder moments, are management’s secret weapon; a Mrs. Soss and a Mrs. Davis at their most strident could have made Commodore Vanderbilt and Pierpont Morgan seem like affable old gentlemen, and they can make a latter-day magnate like Mr. Kappel seem like a henpecked husband, if not actually a champion of stockholders’ rights. At such moments, the professional stockholders become, from a practical standpoint, enemies of intelligent dissent. On the other hand, I thought, they deserve sympathy, too, whether or not one believes they have right on their side, because they are in the position of representing a constituency that doesn’t want to be represented. It’s hard to imagine anyone more reluctant to claim his democratic rights, or more suspicious of anyone who tries to claim them for him, than a dividend-fattened stockholder—and, of course, most stockholders are thoroughly dividend-fattened these day
s. Berle speaks of the estate of stockholding as being by its nature “passive-receptive,” rather than “managing and creating;” most of the A.T. & T. stockholders in Detroit, it seemed to me, were so deeply devoted to the notion of the company as Santa Claus that they went beyond passive receptivity to active cupboard love. And the professional stockholders, I felt, had taken on an assignment almost as thankless as that of recruiting for the Young Communist League among the junior executives of the Chase Manhattan Bank.

  In view of Chairman Phillippe’s warning to General Electric stockholders at Schenectady in 1965, and of the report about the company’s hard-line task force, it was with a sense of being engaged in hot pursuit that I boarded a southbound Pullman for the General Electric annual meeting. This one was held in Atlanta’s Municipal Auditorium, a snappy hall, the rear of which was brightened by an interior garden complete with trees and a lawn, and in spite of the fact that it was held on a languorous, rainy Southern spring morning, more than a thousand G.E. stockholders turned out. As far as I could see, three of them were Negroes, and it was not long before I saw that another of them was Mrs. Soss.

  However exasperated he may have become the previous year in Schenectady, Mr. Phillippe, who also conducted the 1966 meeting, was in perfect control of himself and of the situation this time around. Whether he was expatiating on the wonders of G.E.’s balance sheet and its laboratory discoveries or sparring with the professional stockholders, he spoke in the same singsong way, delicately treading the thin line between patient, careful exposition and irony. Mr. Saxon, in his Harvard Business Review article, had written, “Top executives are finding it necessary to learn how to lessen the adverse impact of the few disrupters on the majority of shareowners, while simultaneously enhancing the positive effects of the good things which do take place in the annual meeting,” and, having learned sometime earlier that the same Mr. Saxon had been engaged by G.E. as an adviser on stockholder relations, I couldn’t help suspecting that Mr. Philippe’s performance was a demonstration of Saxonism in action. The professional stockholders, for their part, responded by adopting precisely the same ambiguous style, and the resulting dialogue had the general air of a conversation between two people who have quarrelled and then decided, not quite wholeheartedly, to make it up. (The professional stockholders might have demanded to know how much money G.E. had spent in the interest of keeping them under control, but they missed the chance.) One of the exchanges in this vein achieved a touch of wit. Mrs. Soss, speaking in her sweetest tone, called attention to the fact that one of the board-of-directors candidates—Frederick L. Hovde, President of Purdue University and former chairman of the Army Scientific Advisory Panel—owned only ten shares of G.E. stock, and said she felt that the board should be made up of more substantial holders, whereupon Mr. Philippe pointed out, just as sweetly, that the company had many thousands of holders of ten or fewer shares, Mrs. Soss among them, and suggested that perhaps these small holders were deserving of representation on the board by one of their number. Mrs. Soss had to concede a fine stroke of chairmanship, and she did. On another matter, although decorum was stringently maintained by both sides, outward accord was less complete. Several stockholders, Mrs. Soss among them, had formally proposed that the company adopt for its director elections the system called cumulative voting, under which a stockholder may concentrate all the votes he is entitled to on a single candidate rather than spread them over the whole slate, and which therefore gives a minority group of stockholders a much better chance of electing one representative to the board. Cumulative voting, though a subject of controversy in big-business circles, for obvious reasons, is nevertheless a perfectly respectable idea; indeed, it is mandatory for companies incorporated in more than twenty states, and it is used by some four hundred companies listed on the New York Stock Exchange. Nevertheless, Mr. Phillippe did not find it necessary to answer Mrs. Soss’s argument for cumulative voting; he chose instead to stand on a brief company statement on this subject that had been previously mailed out to stockholders, the main point of which was that the presence on the G.E. board, as a result of cumulative voting, of representatives of special-interest groups might have a “divisive and disruptive effect.” Of course, Mr. Phillippe did not say he knew, as he doubtless did know, that the company had in hand more than enough proxies to defeat the proposal.

  Some companies, like some animals, have their private, highly specialized gadflies, who harass them and nobody else, and General Electric is one. In this instance, the gadfly was Louis A. Brusati, of Chicago, who at the company’s meetings over the past thirteen years had advanced thirty-one proposals, all of which had been defeated by a vote of at least ninety-seven per cent to three per cent. In Atlanta, Mr. Brusati, a gray-haired man built like a football player, was at it again—not with proposals this time but with questions. For one thing, he wanted to know why Mr. Phillippe’s personal holdings of G.E. stock, listed in the proxy statement, now were four hundred and twenty-three shares fewer than they had been a year ago. Mr. Phillippe replied that the difference represented shares that he had contributed to family trust funds, and added, mildly but with emphasis, “I could say it’s none of your business. I believe I have a right to the privacy of my affairs.” There was more reason for the mildness than for the emphasis, as Mr. Brusati did not fail to point out, in an impeccably unemotional monotone; many of Mr. Phillippe’s shares had been acquired under options at preferential prices not available to others, and, moreover, the fact that Mr. Phillippe’s precise holdings had been included in the proxy statement clearly showed that in the opinion of the Securities and Exchange Commission his holdings were Mr. Brusati’s business. Going on to the matter of the fees paid directors, Mr. Brusati elicited from Mr. Phillippe the information that over the past seven years these had been raised from twenty-five hundred dollars per annum first to five thousand dollars and then to seventy-five hundred. The ensuing dialogue between the two men went like this:

  “By the way, who establishes those fees?”

  “Those fees are established by the board of directors.”

  “The board of directors establish their own fees?”

  “Yes.”

  “Thank you.”

  “Thank you, Mr. Brusati.”

  Later on in the morning, there were several lengthy and eloquent orations by stockholders on the virtues of General Electric and of the South, but this rather elegantly elliptical exchange between Mr. Brusati and Mr. Phillippe stuck in my mind, for it seemed to sum up the spirit of the meeting. Only after adjournment—which came at twelve-thirty, following Mr. Phillippe’s announcement that the unopposed slate of directors had been elected and that cumulative voting had lost by 97.51 per cent to 2.49 per cent—did I realize that not only had there been no stamping, booing, or shouting, as there had been in Detroit, but regional pride had not had to be invoked against the professional stockholders. It had been General Electric’s hole card, I felt, but General Electric had won on the board, without needing to turn it up.

  EACH meeting I attended had its easily discernible characteristic tone, and that of Chas. Pfizer & Co., the diversified pharmaceutical and chemical firm, was amicability. Pfizer, which in previous years had customarily held its annual meeting at its headquarters in Brooklyn, reversed the trend by moving this year’s meeting right into the lair of the most vocal dissenters, midtown Manhattan, but everything that I saw and heard convinced me that the motivation behind this move had been not a brash resolve on the company’s part to beard the lions in their den but a highly unfashionable desire to get the maximum possible turnout. Pfizer seemed to feel self-confident enough to meet its stockholders with its guard down. For instance, in contrast with the other meetings I attended, no stockholder tickets were collected or credentials checked at the entrance to the Grand Ballroom of the Commodore Hotel, where the Pfizer meeting was held; Fidel Castro himself, whose oratorical style I have occasionally felt that the professional stockholders were using as a model, could presumably hav
e walked in and said whatever he chose. Some seventeen hundred persons, or nearly enough to fill the ballroom, showed up, and all the members of the Pfizer board of directors sat on the platform from start to finish and answered any questions addressed to them individually.