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what broader definition of the term "family" is called for, at least one which includes brothers, sisters, and offspring living elsewhere. As you may know, in the course of my own research I was often struck by the disparities between those overall family holdings reported in various business publications and those revealed elsewhere, usually in government sources. It is admittedly very difficult to trace out all the important family interrelationships, but I think that responsible federal authorities should, perhaps through their own research efforts, be more aware of their existence, and that the government should adopt a more realistic definition of the term "family".

Before leaving this topic, I would like to point out that the "identity" problem posed by bank trust department use of "street names" may extend to other corporate stockholding entities, about which we know very little. Is the Provident Securities Co., which according to the 1963 Chain Banking report owned 5.3 percent of the Crocker-Anglo National Bank, actually an investment holding company for the Crocker family? If the Bessemer Securities Corp. (a privately-held operation, I believe) represents the Phipps family interests, this too should be made known to the federal government and the investing public. Again, on page 830 of Part 2 of your hearings, the Federal Power Commission reported to you that the Texas Eastern Transmission Co. was "widely held" (i.e., presumably management-controlled). I am not so sure. In 1973, three of its five outside directors were officers of either the Brown Foundation or Highland Resources, Inc. I suspect that the latter concern is simply an investment vehicle for the Brown interests, since George R. Brown (of Brown and Root) was listed as its board chairman. But this is only a guess. According to Texas Eastern's March, 1973 proxy statement, George R. Brown owned (personally, I believe) 350,489 shares of the company (about 1.5 percent of the stock), and Ralph O'Connor, president of Highland Resources, owned another 21,164 shares. In addition, Herbert Frensley, VP of the Brown Foundation, owned 9,000 shares. However, I don't think these figures reveal the overall holdings of the Brown Foundation (which has over $100 million in assets) or of Highland Resources, Inc. (whatever the latter concern may actually represent). Also, it is interesting to note that back in 1957 (unfortuantely, I don't have a later citation) Business Week said the Brown brothers and their families had a dominant interest in Texas Eastern (see its 5/25/57 issue, p. 106). In short, it seems only right and fair that various stockowning interests should not be able to screen their identity behind street names or other corporate investment mechanisms, and that we ought to know who controls the major banks in the United States and the number of shares they have full or partial power to vote in large American companies.

The passage of new laws on this subject would help immensely, but it would not be enough without proper enforcement. And this is an area where such agencies as the SEC nave, I think, done badly. Having gone through the SEC "insider" transaction records for a number of years, I have the distinct impression (but no proof) that, although there has been some improvement in the last 10 or 12 years, many sizable sales or purchases have simply not been reported to the SEC. More conscientious and vigorous enforcement of the laws is needed in this area if new or improved disclosure requirements adopted by Congress are to have any real lasting effect.

As regards debt ownership of financial institutions in large corporations, I have little knowledge and advice to offer. These credit relationships may be very significant, as some have testified in your hearings (I remember reading an article in Fortune some years ago which pointed up the possible control questions raised by the extensive loans made by NYC financial institutions to various major airlines). Whether commercial bank or insurance company loans are more important than trust department stockownership I don't know. In any case, until such matters are clearly resolved, it would certainly seem that the federal government should have at its disposal the amount of long-term and short-term debt ownership held in various large corporations by major American financial institutions.

The last question I'd like to address myself to is the possibly important role played by those major financial institutions which control large blocks of voting stock in, or have extended substantial credit to, various American corporations. I will comment primarily on the first type of economic relationship, institutional stockownership and its implications for corporate control and management. It is generally claimed by both business leaders and academic economists that the big institutional investors do not play any significant role in corporate affairs, that if they do not like the way a company is being run they will, nonetheless, make little or no effort to intervene in personnel or business decision-making, but rather

quietly try to unload their vast holdings [which might be difficult to do, considering their size, without adversely affecting the value of such shares] and look for some better investment. This may be true, but I am not convinced.

This is an area about which we really have little reliable data, and it needs much more thorough and critical study over an extended period of time. I suspect (though I cannot prove) that the great financial institutions may be so deeply involved in so many major American corporations (whether it be through substantial loans or stockholdings) that they almost have to play a significant role in company affairs (the wreck of the Penn Central may represent an atypical case in this regard). This is not to suggest that the big financial institutions take a direct hand in the day-to-day management of a corporation, but they are certainly concerned about the long-term growth of various business firms, their relative profitability, and the initial selection and overall performance of able high-level corporate executives.

Also, although your 1973 (?) directorship data do not seem to show much evidence of institutional influence, many big financial concerns have been very significantly represented on the boards of a substantial number of large corporations over the years. Why? Is such representation meaningless? Your data, for example, shows (p. 650 of Part 2 of the hearings) that the Chase Manhattan Bank owned, as of 12/31/73, a little over a million shares of the Southern Railway (roughly 5 percent of the voting stock), although it was not then represented on the latter's board of directors. However, it was up to 1967, and so too perhaps, indirectly, was the Metropolitan Life Insurance Co., with which Chase Manhattan may be on friendly institutional terms. (Attached as an apepndix is a breakdown of the make-up of the board of Southern Railway and, as one other example, of the Phelps-Dodge Corp. for 1960, 1965, 1970, and 1974.) A look at the make-up of the board of the Anaconda Co. might also be revealing.

For these and other reasons, I am not readily persuaded that the big financial institutions play such a completely passive role in corporate affairs as has been commonly alleged (although their representation on boards does seem to be declining). More work on this subject is urgently needed. I hope that your subcommittee, and that of Senator Muskie, will continue to pursue studies in this direction, placing proper emphasis on the important concept of the "institutional interlock", and, I might add, on the directorship role of certain major corporate law firms as possible representatives of commercial banks in particular.

I appreciate the opportunity you have given me to comment on this subject, and hope my views will be of some help and interest to you in your work. Sincerely yours,

1970

PHILIP H. BURCH, Jr., Research Professor, Bureau of Government Research.

PHELPS DODGE CORP.

BOARD OF DIRECTORS AND OTHER PERTINENT AFFILIATIONS

Chairman of the Executive Committee, R. G. Page; on the board of directors of the Manufacturers Hanover Trust Co., of New York, N. Y.

President, G. B. Munroe plus five other lesser officials.

Outside directors

W. H. Chisholm, president of Oxford Paper Co., Subsidiary of Ethyl Corp. C. E. Dodge, Jr. (son of former vice president).

J. C. Donnell, II, president of Marathon Oil Co., Ohio.

R. H. Harris, Jr., executive vice president of Manufacturers Hanover Trust Co.

R. L. Ireland, former high official of M. A. Hanna Co., Cleveland.

K. L. Isaacs, former high official of Massachusetts Investors Trust.

E. V. O'Malley, president of O'Malley Lumber Co., Arizona.

E. L. Palmer, executive vice president of First National City Bank, N.Y.C.

W. H. Rea, board chairman of Oliver Tyrone Corp., Pittsburgh; (mother member of Dodge family).

L. Riggs, III, president of St. Joseph Lead Co.

F. Schneider former high official of Newmount Mining Corp.

J. P. Schroeder senior vice president of Morgan Guaranty Trust Co.

1974

President, G. B. Munroe; on the board of directors of the Manufacturers Hanover Trust Co., plus four other former or active high officials.

Outside directors

W. H. Chisholm former high official of Oxford Paper Co., subsidiary of Ethyl Corp.

C. E. Dodge, Jr.

J. C. Donnel II, board chairman of Marathon Oil Co., Ohio.

R. H. Harris, Jr., former high official of Manufacturers Hanover Trust Co., N.Y.C.

R. L. Ireland former high official of M. A. Hanna Co., Cleveland.

K. L. Isaacs former high official of Massachusetts Investors Trust.

E. V. O'Malley president of O'Malley Lumber Co., Phoenix.

E. L. Palmer chairman of the Executive Committee of First National City Bank, N.Y.C.

W. H. Rea, board chairman, Tyrone Corp., Pittsburgh (Oliver, mother, a member of the Dodge family.)

L. Riggs III, board chairman of St. Joe Minerals Corp.

F. Schneider former high official of Newmount Mining Corp.

J. P. Schroeder, executive vice president of Morgan Guaranty Trust Co.

1960

President, Robert G. Page; on the board of directors of the Hanover Bank, New York, N. Y.

Vice President, Cleveland E. Dodge, plus four other such former or active officials.

Outside directors

P. L. Douglas, executive vice president of Otis Elevator Co., New York, N. Y. (son of former Phelps Dodge high official).

W.S. Gray, board chairman of Hanover Bank, N. Y.C.

R. L. Ireland, chairman of the Executive Committee of M. A. Hanna Co., Cleveland and chairman of the Executive Committee of Consolidation Coal Co. K. L. Isaacs, of vice president of Massachusetts Investors Trust Boston.

T. S. Lamont, vice president of Morgan Guaranty Trust Co.)

W. D. Manice, N.Y.C. lawyer. (wed daughter of former high Phelps Dodge official).

R. S. Perkins, chairman of the executive committee of first National City Bank, N.Y.C.

J. C. Rea, Pittsburgh business or financial figure. (wed daughter of Cleveland Dodge).

F. Schneider, former high official of Newmount Mining Corp.

H. D. Smith, former high official of Newmount Mining Corp.

A. C. Tener, Pittsburgh lawyer.

1965

President, R. G. Page; on the board of directors of the Manufacturers Trust Co. of New York, N. Y.

Vice President, C. E. Dodge, plus three other former or active high officials. Outside directors

M. P. Aldrich, president of Commonwealth Fund, N. Y.C.

C. E. Dodge, Jr., son of above vice president.

W. S. Gray, former high official of Manufacturers Hanover Trust Co.

R. H. Harris, Jr., executive vice president of Manufacturers Hanover Trust Co. R. L. Ireland, former high official of M. A. Hanna Co. and vice president of Consolidation Coal Co., Cleveland.

K. L. Isaacs, vice chairman of Massachusetts Investors Trust.

R. S. Perkins, chairman of the executive committee of the First National City Bank, N.Y.C.

J. C. Rea, Pittsburgh businessman (same as 1960).

F. Schneider, former high official of the Newmount Mining Corp.

J. P. Schroeder, vice president of Morgan Guaranty Trust Co.

C. O. Stephens, president of Texas Gulf Sulphur Co.

1970

SOUTHERN RAILWAY

BOARD OF DIRECTORS AND OTHER PERTINENT AFFILIATIONS

President, W. G. Clayton, Jr.; on the board of directors of Morgan Guaranty Trust Co.

Past presidents.-H. A. DeButts; D. W. Brosman.

Past vice president.-W. H. Moore.

Outside directors

W. R. Bond, president of Woodward Co., division of Mead Corp.

D. T. Bryan, board chairman, Media General, Inc., Virginia.

A. K. Davis, board chairman of the Wachovia Bank & Trust Co., N.C.

L. F. Howard, N. Y.C. investor.

R. F. Leach, vice president, Morgan Guaranty Trust Co.

E. B. Leisenring, Jr., president, Penn Virginia Co.; president, Westmoreland Coal Co.

R. W. Woodruff, chairman of the Finance Committee of Coca-Cola Co., Ga. K. Woolley, partner, Brown Bros. Harriman & Co.

1974

President, W. G. Claytor, Jr.; on the board of directors of the Morgan Guaranty Trust Co.

Past presidents.-H. A. DeButts; D. W. Brosman.

Outside directors

W. R. Bond, former high official of Woodward Co., division of Mead Corp.

D. T. Bryan, board chairman of Media General, Inc., Va.

Archie K. Davis, board chairman of Wachovia Bank & Trust Co., N.C.

C. W. Duncan, Jr., president of Coca-Cola Co., Ga.

L. F. Howard, N. Y.C. investor.

R. L. Ireland, III, partner, Brown Bros. Harriman & Co.

R. F. Leach, chairman of the Executive Committee, Morgan Guaranty Trust Co.

E. B. Leisenring, Jr., president of Penn-Virginia Corp., Pa.; also president, Westmoreland Coal Co.

R. E. McNair, S.C. lawyer.

1960

President, Harry A. DeButts; also on the board of directors of the Chase Manhattan Bank.

Vice president, D. W. Brosman.

Outside directors

Harllee Branch, Jr., president of Southern Co., Ga.

D. T. Bryan, P & T, Richmond Newspapers, Inc.

George Champion, president of Chase Manhattan Bank.

Robert V. Fleming, board chairman of Riggs National Bank, Washington, D.C. Also on board of directors of the Metropolitan Life Insurance Co.

Oliver Iselin, cochairman, Iselin-Jefferson Co., N.Y.C.

Jeremiah Milbank, wealthy N.Y.C. investor. Also on the board of directors of the Metropolitan Life Insurance Co. Also has a son on the board of directors of the Chase Manhattan Bank.

Langbourne M. Williams (married into Stillman-Rockefeller family) board chairman of Freeport Sulphur Co., N. Y.C.

Robert W. Woodruff, chairman of the Finance Committee of Coca-Cola Co.. Ga. Also on the board of directors of the Metropolitan Life Insurance Co. Knight Woolley, partner, Brown Bros. Harriman & Co., N.Y.C.

1965

President, D. W. Brosman.

Retired president, H. A. DeButts.

Outside directors

W. R. Bond, president of Woodward Corp., Alabama.

H. Branch, Jr., president of Southern Co.

D. T. Bryan, same as 1960.

G. Champion, board chairman, Chase Manhattan Bank.

R. V. Fleming, chairman of the Executive Committee (same as 1960) of the Riggs National Bank, Washington, D.C.

J. Milbank, New York, N. Y., same as 1960.

L. M. Williams, board chairman, Freeport Sulphur Co., same as 1960.

R. W. Woodruff, chairman of the Finance Committee of Coca-Cola Co., same as 1960.

K. Woolley, partner, Brown Bros., Harriman & Co.

THE NEW YORK STOCK EXCHANGE,
New York, N. Y., October 23, 1974.

Hon. LEE METCALF,
Committee on Government Operations, Subcommittee on Budgeting, Management and
Erpenditures, U.S. Senate, Washington, D.C.

DEAR SENATOR METCALF: Thank you for your letter of August 16, 1974, regarding the problems raised by Norman J. Fischer, Chairman of Medalist Industries, Inc. In the interim the Exchange staff has conducted an exhaustive inquiry into the matters raised by Mr. Fischer in his testimony before your Subcommittee.

Although Medalist Industries, Inc. is traded on the American Stock Exchange, the New York Stock Exchange has undertak en the investigation of the voting and processing procedures used by member organizations of this Exchange. Mr. Fischer's report that only 59% of the stock in the Cede nominee name was voted at the annual meeting represents a low vote return, as William Dentzer of the Depository Trust Company has advised in his letter to you on this matter. According to DTC, this result is not at all characteristic of the experience of other companies in receiving the Cede vote.

The Exchange, in its review, directly contacted all 52 member organizations entitled to vote their Cede shares at the Medalist annual meeting. We have ascertained from this review that there were instances and situations regarding members voting which may explain, to a degree, this 18% decline from the norm. Several of the firms contacted advised that their proxies were mailed two or three days prior to the annual meeting date and that these proxies may not have been received in Milwaukee in time to be counted at the annual meeting. Normally, a two to three day mailing period has been adequate. Some of the firms contacted advised that they did not receive any proxy material from the company even though repeated requests were made for the material. A number of member organizations advised that they received proxy material shortly before the annual meeting date, thus reducing the chances for a good return vote from stockholders. There were instances where member organizations made procedural errors and oversights in their proxy handling for this meeting. We are reviewing these cases in detail to determine if any action by the Exchange against the member organizations is warranted. I feel it appropriate at this time to acquaint you with the procedures that are followed by the Exchange in these areas.

1. Whenever there is an examination of a member firm that carries securities for its customers or customers of other firms, the firm's Proxy Department and proxy procedures are examined. The examiner's checklist specifically states that in all such cases, this is a mandatory assigned task.

2. The scope of the examiner's task requires testing that would determine the firm's compliance with the Exchange Rules that apply in this area.

3. If any problem involving either the distribution, solicitation or overall handling of proxies or a member firm's procedures for proxies is found:

a. The supervisory personnel of the firm are counseled by both the examiners themselves and the firm's coordinator on whatever corrective action is necessary. b. The information discovered by the examiner, if material in nature, is referred to the Exchange's Department of Enforcement for further investigation and disciplinary proceedings, if necessary.

Concerning the complaint on the questionnaire sent to member organizations by Medalist Industries to determine eligibility for the listing of Medalist on the New York Stock Exchange, Inc., I would like to explain that these surveys to determine the number of round-lot holders are conducted by the Exchange staff, and not the subject company. The Exchange, for listing purposes, would not accept the figures received by the company since we would require substantiation of these figures by our staff. Without having the benefit of the particulars, I could only surmise that some member organizations were familiar with dealing directly with the Exchange on these matters and gave the request from the company a very low priority.

Regarding the problem of Medalist being unable to identify a major funds' ownership of its securities because the shares were in a nominee name, as Mr. Fischer states in his testimony, there are sources available to determine who a nominee acts for. One of these is a publication of the American Society of Corporate Secretaries of which Medalist is a member. This publication sets forth a list of nominees and a list of organizations that utilize nominee names.

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