Who Owns And Votes The Shares

Melford Pearson

1996

Published in:

Social Trends Newsletters, Mar. 1996, No. 145
Reprinted by permission of the author. Excerpted from Mr. Pearson's book, There is a Way to Peace and Social Justice, Copyright, 1995. Aquila Press, Inc., PO Box 252, Noblesville, IN 46061

EXTOLLERS of the private capitalist system, or its brainwashed idealists, will try to allay all concerns as to one- bank holding companies, and their interlock-directorships, by contending that the majority of the American people own the corporation's shares, elect the boards of directors, and are thereby the real owners and arbiters of the enterprises.

Nothing could be further from the truth!

There have been many studies and reports as to stock ownership. One of the most comprehensive coverages is to be found in the book, The Rich and the Super-Rich, by Ferdinand Lundberg, which was published in 1968. It brought out the fact that of all the 54 million spending units (one or more persons established as a household), 86 percent owned no stock at all. Of those with income between $7500 and $10,000, 78 percent owned no stock. Of those with income between $5000 and $7000, 81 percent owned no stock.

Bearing in mind that anyone qualifies as a stockholder if he or she owns only one share worth fifty cents, it is an exercise in incredulity to portray the general public, "little old ladies in tennis shoes", as the across-the-board stockholders in the nation's monopolistic, corporate conglomerates.

Lundberg's research underscored the revealing fact that two percent of the adult population owned 32 percent of all privately owned wealth in the nation. Such ownership consisted of 82.2 percent of all stock, along with vast ownership in bonds, mortgages, pension and retirement funds, property and real estate.

A further revealing fact was that 60 percent of all stock ownership was not earned but inherited. . . .

Voting Rights in Major Corporations

This definitive Study, dated January, 1978, was released by the Subcommittee on Reports, Accounting and Management, a subcommittee of the Senate Committee on Governmental Affairs. Out of this Study emerges the fact that it is not stock ownership that is crucial but who votes that stock. And it substantiates the circumstance that it is not individual stockholders but banks and investment institutions that have the real voting power. The Study states:

Voting rights to about half of the stock in U.S. corporations are held by banks and trust companies, foundations and educational endowments. The rest of the stock is widely held by individuals and organizations such as private investment companies, brokerage firms, fraternal and religious organizations and hedge funds, which generally are partnerships formed for investment purposes of a speculative nature. Many individual stockholders do not bother to exercise their voting rights, which in most instances are infinitesimal alongside those of institutional investors. The Soviet-syle election typically held by corporations -- with a single slate of directors and an auditor, sharply restricted communications among voters and procedural impediments to provision of choices for them -- does not induce participation, especially when one institution can out-vote thousands of individuals. . .

Quite clearly the individual stockholder has no decision-making voice in corporate business or policy. Of course, in small corporations, often family operated, there is a voice but their share of the productive capability of the nation is insignificant as to volume. Further, the future plight of the small retailer, the small manufacturer and small farmer involves accelerated foreclosures as monopolies in all fields gain increased power.

What about the workers, tens of millions, and their pension plans? What voice do the workers have in determining the safe investment of their hard-earned dollars? The Study had this to say:

Pension funds nominally comprise the largest category of stockholding. Private noninsured pension fund stock had a market value of $109.7 billion and State and local retirement fund stock a market value of $30.1 billion, for a total of $139.8 billion at the end of 1976 , according to the SEC. Large corporate pension funds will double in less than 5 years and double again by 1986, according to a recent estimate by Greenwich Associates. However, most pension funds are not self- administered. Management of pension assets, including the authority to buy, sell and vote equities, is concentrated among banks, insurance and investment- investment advisory companies.

Another excerpt from the study is important to note. It covers the concentration of stock control and what corporate entities managed what percent of existing stock. This is the breakdown that was arrived at:

A recent indication of the concentration of stock control can be found in the tabulation of the 100 largest equity managers, as of the end of 1976, by Institutional Investor. The 100 firms managed stock with a market value of about $300 billion. That was approximately four-fifths of all the stock managed by institutional investors. Among the 100, banks managed almost 50 percent of the stock, investment advisory complexes 23 percent, insurance companies about 9.5 percent. Self- administered corporate pension funds and self-administered public pension funds each managed about 3.4 percent and foundations less than 1 percent.

The foregoing documentation, accentuating institutional, concentrated control of major stock, should dispel any doubt as to who are the real arbiters of corporate policy. It should also clarify for TV watchers how so many tens of millions of stock could be sold and bought each day at the Stock Exchange. Of significant importance, of course, is understanding who actually manipulates the ups and downs of the stock market.

Even the least informed shareholder must question the integrity and honesty of the stock market that fluctuates in value by tens of billions of dollars overnight. Certainly, the most gullible buyer and seller of individual stocks must have experienced extreme bewilderment over Black Monday, October 19, 1987, when the market plummeted 508 points. This was equivalent to a loss of 508 billion dollars of stock value within a span of 24 hours!

The relevant question is: How could the worth of corporations, measured in terms of their tangible machinery, buildings and assets, become one-half trillion dollars less in value overnight?

Facetiously, one might query did it happen by a certain configuration of spots on the sun, or simply by the perverseness of inanimate objects? Levity aside, beneath all the intricacies of the Dow Jones closings and economic indexes, the answer to the stock market plunge is inescapably clear.

It happened by the selling and buying of stock by powerful institutional investors who have financial axes to grind. And the losers? They are simply those who are not privy to what is being manipulated based on inside information.

Periodically, an Ivan Boesky, a Milken or an E.F. Hutton are brought before the bar of justice, but only a slap on the wrist is meted out to them and there is no deterrent penalty assessed that precludes others from similar exploitive, criminal action.

The Stock Market contributes nothing tangible to the nation's production of goods and services. It is a cancerous growth on the body politic. It is an artificial entity created and promoted by a greedy few to increase their unearned profits and to increase invalid corporate ownership. It is bilking on a national scale with a lot of innocent people the victims, like the tens of millions of workers whose hard-earned dollars in pension funds are constantly jeopardized.

Some day an enlightened society will realize that the entire Stock Exchange could be unceremoniously relegated to the bottom of the Grand Canyon and the nation's capacity to produce all goods and services would not be lessened one iota!