At a meeting of the Chicago, Rock Island and Pa cific Railroad held April 12, 1915, a minority com mittee, after the most strenuous campaign to get proxies, succeeded in procuring only about one-third as many shares as were held by a ma jority committee. In 1913, one Isaac ]N.E. Cate sent out elaborate booklets complaining of the acts of the directors of the Ameri can Locomotive Company, and inclosing proxies with stamped and addressed envelopes in which the executed proxies might be returned to him. His ef forts were wholly unavailing.
(e) Stock may be divided into voting and non-vot ing classes, or a small class of stockholders may be given the right to elect a majority of the directors. When the American Tobacco Company was formed in 1904, it issued about twice as much preferred stock as common stock, but the common held by the insid ers was voting stock, while the preferred was de prived of that privilege. Another interesting exam ple is seen in the formation of the Rock Island Com pany in 1902 with about $50,000,000 preferred and $90,000,000 common. This time, the insiders held the preferred stock, for that issue was given the right to elect five of the nine directors. • ( f) Large individual stockholders of the subsidiary may be owners of the parent company, and vote with it to control the subsidiary. The Gould and Vander bilt families thus frequently kept their hands on both the parent and subsidiary roads of their railroad sys tems, by holding in their own names, such proportion of the stock of the subsidiaries as would give their parent companies control of over 51 per cent of the subsidiaries' voting stock.
(g) A final reason why less than a majority of the stock may control a company is illustrated by the Des Moines Union Railway Company, whose articles of incorporation provide that a director cannot be elected, the articles of incorporation amended, or the capital stock increased, except by a vote of more than seven eighths of the stock. If the board of directors of this company own slightly more than one-eighth of all the stock, their tenure of office is secure.
7. Why stockholders surrender control of subsidi aries to parent company.—When corporations con solidate all their assets or all their stock, some induce ments are held out to the stockholders to urge them to turn the control of their properties over to an other company. To be sure, there have been cases
where corporate waifs have. sought parents instead of the parents looking about for foster children. In this way the New York Central had thrust upon it the West Shore road, and the Atlantic Coast Line had unloaded upon it the Louisville and Nashville. But the Cincinnati, Hamilton and Dayton is the cham pion wanderer among railroads. Since it was first scuttled in 1886, the interests that controlled it tried i_iccessively to palm it off on the Baltimore and Ohio, on the Vanderbilt roads and on the Erie, and finally succeeded in dumping it on the Baltimore and Ohio in 1911. At this writing the road is going thru re orcranization.
Sometimes corporations are started merely to black mail existing corporations into buying them up. Numerous examples of the creation of such "cat-tails" can be found in railroad history. Dr. A. S. Dewing I says that in a conversation with an old member of the National Cordage Company, he was told that some people prepared a cordage mill in Pennsylvania with "wooden painted shafting and nicely painted, but use less machinery. It might have cost 85,000 to pre pare the hoax; the officers of the National Cordage Company paid $180,000 for it!" 8. Technical advantages resulting from plants an appeal is made to stock holders on the ground that the technical advantages obtained thru combining plants are sure to result in enormous profits. From an early prospectus of the United States Shipbuilding Company, we may learn how these benefits would be brought about: The acquirement by this corporation of all the plants and properties above stated presents distinct advantages, as stated by Naval Constructor F. T. Bowles, in his report dated December 22, 1900, as follows: 1. Each concern builds that for which it is best fitted and equipped, or that which its character, location and labor can accomplish most economically.
2. Structural materials, steel, iron, timber, etc., can be purchased at the lowest rates, a prompt supply secured at points where it is most needed.
3. The technical knowledge of desig,n, which comes from experience, records, and data of each concern, will be com bined, thus giving confidence to customers that the results contracted for shall be attained.