Magazine article Financial History


Magazine article Financial History


Article excerpt

The 1933 ANNUAL meeting of ExxonMobil, then Standard Oil of New Jersey and among the world's oldest and largest corporations, was a gathering of five people at a New Jersey gas station. By 1977, the company's annual meeting filled the 2,000-seat Houston Music Hall and in 2018 still draws thousands to a similar Dallas venue.

These dramatically different attendance numbers point us to the history of the corporate meeting. Chief protagonists are John and Lewis Gilbert, brothers who chose fighting for shareholder rights as their life's work. Their motives appear in Lewis Gilbert's portrayal of the problem in his 1956 book, Dividend and Democracy:

In 1932, the typical annual meeting, often tucked away in some remote rural hideaway, was usually attended by no more than a silent dispirited baker's dozen who listlessly listened to the mechanical legal jargon by which insiders re-elected themselves to do as they pleased.

Through the 1930s, large US corporations were owned mostly by a small number of influential banks, financiers and dynasties, such as Morgan, Rockefeller and Vanderbilt. But as the Great Depression stoked suspicions of concentrated corporate power, Congress passed banking, securities and tax laws that fostered diffuse share ownership.

Individuals nationwide came to own stock in American companies, and the Gilberts spent five decades advocating for them. Their legacy of shareholder engagement endures, though the US shareholder base since 1980 re-concentrated, with rising ownership by pension funds, mutual funds and other institutions.

The legacy is relevant to emerging debates over whether annual meetings should continue to be held in-person anymore, or instead solely online, as several public companies have recently begun doing. This modern development stirs debate about the purpose and value of shareholder meetings. History sheds light on the stakes.

The Populist Quest for Shareholder Democracy

From 1940 to 1979, as individuals steadily came to own more and more corporate equity, the annual meeting grew increasingly engaging. While only a small percentage of shareholders attended, and a minority of those spoke up, they helped forge a shareholder-centric orientation across corporate America.

The Gilbert brothers and fellow advocates put proposals on the meeting agenda for a vote, posed pointed questions to senior managers during the proceedings and then publicized their progress widely. All were media savvy, spreading their mission in articles and books, on radio and television, and through public lectures and Congressional testimony.

The Gilberts were known as the deans of the professional shareholders. Throughout this period, the brothers personally attended as many as 300 annual meetings yearly and covered another 50 with a small staff of associates. Legatees of an estate whose assets included small stakes in some 600 public companies, the two lived in a fashionable apartment building on Manhattan's Upper East Side.

The Gilberts' persistence and logic won them many governance reforms over five decades, ranging from confidentiality in shareholder voting to the rise of outside directors. As early as 1947, they gained a tactical advantage after pushing shareholder proposals at Transamerica to have shareholders choose the auditors and for a post-meeting transcript. In ordering the company to comply, an influential court opinion famously explained, "A corporation is run for the benefit of its stockholders, not for that of its managers."

Annually from 1940 to 1979, the Gilberts published a book-length account of the major annual meetings and related issues of the day. Entitled "Annual Reports on Stockholder Activities at Corporation Meetings," the Gilbert volumes were published in limited quantities-print runs of 8,500 in earlier years and 6,000 in later ones-and are today collectors' items.1

The reports were astonishingly consistent, opening with 20 pages of photographs from the year's meetings; a brief useful glossary; a consciously-compact average of about 265 pages of narrative text; an index of companies; and, most impressively, a substantially identical table of contents (see Figure 1). …

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